What year is this?
Is this 1999? It sure feels like it…
We don’t know how many of you remember the internet bubble which started in 1995, reaching parabolic ascension from late 1998 to 2000 before blowing up in the most spectacular fashion, taking the Nasdaq index down almost 80% from its high.
Historically, companies that produce profits, or at least that are expected to do so in the foreseeable future, are considered valuable. Somehow, during the late ‘90s, investors have concluded that there was no need for profits as long as companies could show growth in a different form, like “eyeballs count” for internet companies (e.g. counting the number of people who have visited the websites). It was sales growth at all costs. A well-known CEO then pointed out how insane it is to think you can sell 1 dollar for 90 cents and try to make it up with volume. Even adding the 2 words “dot com” in the name would increase the share price on the market. The euphoria eventually ended with many internet and e-commerce companies that were initially given the benefit of the doubt being worthless.More