480 companies went public in 2020, a new record high. A modest decline, but nothing compared to the dismal figures of 2001, in which only ninety-one IPOs opened.įrom 2015 to 2019, anywhere from 133 and 255 opened annually, similar to rates in the late nineties. The first year of the new millennium saw an estimated 446. That’s when a company “goes public” with their shares, hoping to hook new investors. The first symptom of financial inflammation is an increasing number of Initial Public Offerings, or IPOs. Today’s tech giants have made that perfectly clear. Enough articles exist about whether our current economic climate is a reincarnation of the bubble burst (it is). It took over a decade of war, high unemployment, and terrible politics for the economy to resemble something “normal.” Now that so-called normalcy is near the vanishing point of the same black hole that swallowed our pre-COVID world. From that point on, it was their game to lose. Each had gifted themselves a chance to redefine the tech industry. By eliminating the income of thousands, the remaining companies exemplified a vicious form of resilience. It ruptured like an organ, and killed just as slowly.įirst generation dot-coms laid off anywhere between 14,000 and 18,000 employees, maybe more. Saddled with marginal debts (around $500 billion today), the hands that fed soon vanished. Their prospects proved a total bust, and they still had to repay their lenders. They had gone all-in, and it was too expensive to buy more money. Too many had gorged themselves on invested capital.įor investors, there was no way out. Why would the world’s most technologically advanced nation experience a recession when demand was high? Looking around them, only a handful of dot-coms survived long enough to pay dividends. News of a Japanese recession troubled venture capitalists. By 2000, borrowing money was no longer worth it. The US Central Bank raised the rate six times in just ten months, up to 7%. Meanwhile, federal interest rates had been climbing. Opportunities for profit dwindled as quickly as they appeared. Divining a dot-com’s earning potential soon became all but impossible while discrepancies between stock prices and profits widened. When a dot-com company fell, its investors fell too, hard. Like the immortal yet ever imperiled Highlander, there could only be one. ![]() Who would survive? Ill-prepared competitors folded fast, exposing the key players (Google hadn’t entered the fray yet, and wouldn’t until 2004). Pressure for dot-com companies to make it big skyrocketed. Margin debt hit an all-time high during the fervor. Some were so confident, they borrowed additional funds from brokers to invest even further, an expense known as marginal debt. High rollers blindly sank their fortunes into start-ups, anticipating huge returns. In response, tech companies everywhere made their shares available for public purchase. The Act simply raised the roof, encouraging further hasty investment. For big investors, lower tax rates mean higher profit ceilings. The Taxpayer Relief Act of 1997 lowered tax rates on income from trading stocks, or capital gains. Brokers and investors at NASDAQ and the New York Stock Exchange were pumping millions of dollars through novel corporate channels. Amazon cornered online shipping while eBay became the internet’s first major auctioneer. Booking Holdings rounded up airline connections through Priceline and Kayak. The selling price of your product depended on its irreplaceability, which is largely true today. ![]() The Enron scandal of 2001 effectively eulogized the era.Īt first all you needed was a good idea and a domain name. ![]() It swelled to preposterous size and peaked somewhere between Bill Clinton’s impeachment and 9/11. America’s first tech boom, the dot-com years got their name from companies operating entirely through online enterprises. This was, in part, the setup for the infamous dot-com bubble and its catastrophic burst. No matter what parcel of virtual space you bankrolled, you were almost guaranteed a profitable return-almost. Tech companies sprang up overnight, each hoping to draw big money from a seemingly limitless well of capital funds. The rise of home internet usage was spurring several investors to stake digital claims like an online Oklahoma land run. Is the second dot-com bubble bursting? “Irrational exuberance”įormer Federal Reserve Chairman Alan Greenspan first uttered the phrase in 1996, describing what he considered an alarming economic trend.
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