2000 vs 2018 Tech Bubble – Over 80% Of IPOs In 2017 Had Negative Earnings, Some Of Them Are Just One Breath Away From Bankruptcy, Sky-High Valuations Everywhere…

The bubble popping in 2000 (it was not 2001) was a lot like an avalanche. It wasn’t clear exactly which snowflake was the one that put it over the tipping point, but once confidence was lost, it went very quickly.

The closest thing to a catalyst was an article written by Barron’s in March, 2000, called “Burning Up?”

The market had already started dropping a couple of weeks prior, but the article seemed to provide the push over the cliff that everyone was waiting for.

The rest is history:

Bursting of the bubble

Around the turn of the millennium, spending on technology was volatile as companies prepared for the Year 2000 problem, which, when the clocks changed to the year 2000, actually had minimal impact.

On January 10, 2000, America Online announced a merger with Time Warner, the largest to date and a move that was questioned by many analysts.[18]

In February 2000, with the Year 2000 problem no longer a worry, Alan Greenspan announced plans to aggressively raise interest rates, which led to significant stock market volatility as analysts disagreed as to whether or not technology companies would be affected by higher borrowing costs.

On March 10, 2000, the NASDAQ Composite stock market index peaked at 5,048.62.[19]

On March 13, 2000, news that Japan had once again entered a recession triggered a global sell off that disproportionately affected technology stocks.[20]

On March 15, 2000, Yahoo! and eBay ended merger talks and the Nasdaq fell 2.6% but the S&P 500 Index rose 2.4% as investors shifted from strong performing technology stocks to poor performing established stocks.[21]

On March 20, 2000, Barron’s featured a cover article titled “Burning Up; Warning: Internet companies are running out of cash — fast”, which predicted the imminent bankruptcy of many internet companies.[22] This led many people to rethink their investments. That same day, Microstrategy announced a revenue restatement due to aggressive accounting practices. Its stock price, which had risen from $7 per share to as high as $333 per share in a year, fell $120 per share, or 62%, in a day.[23] The next day, the Federal Reserve raised interest rates, leading to an inverted yield curve, although stocks rallied temporarily.[24]

On April 3, 2000, judge Thomas Penfield Jackson issued his conclusions of law in the case of United States v. Microsoft Corp. (2001) and ruled that Microsoft was guilty of monopolization and tying in violation of the Sherman Antitrust Act. This led to a one-day 15% decline in the value of shares in Microsoft and a 350-point, or 8%, drop in the value of the Nasdaq. Many people saw the legal actions as bad for technology in general.[25] That same day, Bloomberg published a widely-read article that stated: “It’s time, at last, to pay attention to the numbers”.[26]

On Friday, April 14, 2000, the Nasdaq Composite index fell 9%, ending a week in which it fell 25%. Investors were forced to sell stocks ahead of Tax Day, the due date to pay taxes on gains realized in the previous year.[27]

By June 2000, dot-com companies were forced to rethink their advertising campaigns.[28]

On November 7, 2000, Pets.com, a much hyped company that had backing from Amazon.com, went out of business only 9 months after completing its IPO.[29] At that time, most internet stocks had declined in value by 75% from their highs, wiping out $1.755 trillion in value.[30]

In January 2001, just 3 dot-com companies bought advertising spots during Super Bowl XXXVE-TradeMonster.com, and Yahoo! HotJobs.[31]

The September 11 attacks accelerated the stock market drop.[32]

Several accounting scandals and the resulting bankruptcies, including the Enron scandal in October 2001, the Worldcom scandal in June 2002,[33] and the Adelphia Communications Corporation scandal in July 2002 further eroded investor confidence.

By the end of the stock market downturn of 2002, stocks had lost $5 trillion in market capitalization since the peak.[34] At its trough on October 9, 2002, the NASDAQ-100 had dropped to 1,114, down 78% from its peak.[35][36]

en.wikipedia.org/wiki/Dot-com_bubble

2018:

Over 80% of #IPOs in 2017 had negative earnings – only in manias do these deals get done. Last time was the tech wreck

Via @trevornoren

108 operating companies went public in the U.S. in 2017 with the average first day return a healthy 15.0% – well above the average 12.9% bump seen since the start of the 21st century.

But of most note in years to come, we suspect, is the fact that over 80% of IPOs in 2017 had negative earnings… the most since the peak of the dot-com bubble in 1999/2000…

www.zerohedge.com/news/2018-05-19/over-80-2017-ipos-had-negative-earnings-most-dot-com-peak

Some of them are slowing going bust:

Tintri: Next Stop, Oblivion

Tintri reported an extremely weak Q2, with both revenues and margins far below estimates.

Shares crashed 32% to an all-time low of $4.60 after the announcement.

With only $12 million of net cash left on its balance sheet and a burn rate of ~$82 million, the company is one breath away from bankruptcy.

seekingalpha.com/article/4105719-tintri-next-stop-oblivion

Blue Apron Holdings Inc Stock Is Likely Headed to Zero

It might sound like hyperbole to suggest that Blue Apron could go bankrupt in 2019, two years after its IPO. And, to be fair, it’s unlikely. But it’s far from impossible.

Blue Apron ended Q3 with $266 million in cash. It has another approximately $75 million in availability on its revolving credit facility, which matures in 2019. But bear in mind that Blue Apron this year alone has burned $239 million in cash. Nearly half of that burn is coming from capital expenditures, mostly related to new fulfillment centers, and that spend will come down. But simply on an operating basis, Blue Apron is on pace to burn $160 million this year.

finance.yahoo.com/news/blue-apron-holdings-inc-stock-172409442.html

PetSmart Probability Of Bankruptcy

www.macroaxis.com/invest/ratio/PETM–Probability-Of-Bankruptcy

Toys ‘R’ Us and Babies ‘R’ Us going-out-of-business sales start Friday

www.marketwatch.com/story/toys-r-us-and-babies-r-us-going-out-of-business-sales-start-friday-2018-03-23

What’s the Chance of Iconic GE Going Bankrupt?

When all is said and sold off, GE’s debt burden – much of it attributable to GE Capital – looks enormous versus the size of the remaining assets and cash flow.

wolfstreet.com/2018/02/05/whats-the-chance-of-iconic-ge-going-bankrupt/

Valuations for “Tech-Enabled” Companies Are Still Too High

chrisschidle.com/valuations-are-still-too-high/

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