IPO mania and high investor activity recently suggests that a repeat of 2000 is not far off…

 

They are already comparing the jump in profitability and capitalization of digital industry giants with the boom of the late 20th century, which preceded a sharp drop-then in a short moment the value of such large companies at that time, such as Cisco, Intel and Oracle, fell by 80%, and the recovery to the previous level took about 15 years on average.

 

This was a period of the Domino effect of many failed companies in a chain, when one pulled the other, and also many simply failed separately.

 

Despite the speculative nature of the modern market, many investors, however, in view of the trends of qualitative growth over the past six months, are ready to take on responsibilities and join the digitalization race, which, again, has become the best news for IT companies since 1999.

 

Economists, investors and brokers are very concerned about the stock market situation, namely: the boom in the IPO market, the sharply increased activity of investors such as users of a service like Robinhood, as well as the degree of “overheating” of shares of large technology companies.

 

Interestingly, despite all the coronavirus aspects of doing business in the world recently – the IPO market is experiencing not only resuscitation – it has a Golden time! If you remember how feverishly investors threw themselves into the furnace of the growth fever of Internet companies in 1999-Yes, the situation is very similar to that moment.

The culmination of September was the IPO of the cloud company Snowflake: on the first day of trading, the cost rose more than 2 times and the capitalization increased to $70 billion… $3.4 billion was raised — since 2000, there hasn’t been an IPO that raised more than $1 billion with such a rise in shares – twice as much on launch day.

 

In General, since the beginning of 2020, more than 235 companies have entered IPOs in the United States, and there were 439 more only in 2000.

 

 

It was after the IPO that Snowflake remembered the bubble of Internet companies. “The flurry of IPOs and mad buying of shares by investors are all classic signs of euphoria and a bubble, reminiscent of the previous obsession with Internet companies. We know how it ended,” said David Rosenberg, an economist and founder of Rosenberg Research.

 

When the tech bubble burst in 2000, the Nasdaq dropped more than 80% in two years, and the S&P 500 lost about 50% of its value, Rosenberg recalled. “Unfortunately, many people try to explain that this time everything is different. But the quality of companies seems to be no better than it was 20 years ago,” the economist concluded.

 

Take a look at the indicators of these companies: their revenue and lack of profit. And look at the auction: the reaction on the first day or first week of trading is very similar to what we saw in 1999-2000.

 

Just say, “we work in the cloud” or “We have cloud solutions,” and suddenly the company gets huge ratings. This was already the case in ‘ 99: “I work on the Internet, in the company name есть.сом”. Oh, then you are worth much more!

 

such attention of the economic community, probably, will not allow the history of 2000 to repeat-that’s why predictive systems in cloud technologies – now, the larger the company, the more resources are spent on strategic planning and eliminating repetitions of such falls.

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