The New Tech Bubble – Bursting Point?

Earlier this month I posted a link to a piece in the Wall Street Journal – a regional newspaper with an adequate circulation – which talked about Facebook and its propects as far as making money – specifically from advertising – were concerned. This was tied in to the much-vaunted float of Facebook, which has been the subject of speculation for some considerable time now.

Now, for your delight and delectation, here’s another piece from the same regional newspaper, entitled ‘Facebook Targets Huge IPO’, in which it is posited that the good ‘Book and the odious turd Zuckerberg, may be looking to raise some $10bn, valuing the whole shoddy shebang at $100bn. To give you an idea, the only other American companies to have completed at or above this level are Visa, General Motors and AT&T.

My loyal readers (ooooooh, my aching sides) will know that I do not have a great deal of time for Facebook. I cannot help but think of naked royalty and haberdashering conmen when I look at it, and its business model. But, I am fully prepared to admit, what do I know. Apart from how genuinely scary some of it is – have a quick look at this, and tell me you want to be a part of it, either personally, professionally or corporately.

Anyhoo – the general tone of the WSJ article is positive. I believe the correct term is ‘bullish’. (As an aside, recently I have been bombarded – don’t ask – with headlines using the descriptor ‘bearish wedge’. This tickled me, I know not why – I think it’s probably because, to my mind, it’s either ‘bear’ or it isn’t ‘bear’. Nothing is ‘bearish’. Unless you happen to be a woodsman in Georgia, living off the land, in which case you might be chewing on, say, raccoon and comment that it tastes a bit ‘bearish’. And ‘wedge’, well, it’s onomatopoeic, isn’t it? Isn’t it?) But within the article, there is an interesting sentence or two, that gave me pause. You see, I lived through the tech bubble of the turn of the Noughties and I remember the hysteria and the silly money made and the even sillier money lost.

The article says that Facebook will probably go ahead with the deal – but at a time when investors are beginning to doubt the value of some internet businesses. (Sound familiar yet?) Apparently, Groupon floated on November 3 – and has lost 42% of its value in the last five trading days. LinkedIn, whose stock more than doubled from its IPO price on its first day of trading May 19, has since fallen 36% (although it remains 33% above its IPO).

OK – only two examples. The issue, however, is that when the Noughty tech bubble burst, we were talking about millions being lost. So far, so dreadful. If, indeed, we are seeing another tech bubble now – and, as I said earlier, what do I know – and it follows the trad bubble pattern, then this time it’s serious money that’s going to be lost.

Someone said to me, when the rumours about a Facebook float first surfaced, that the thing to do would be to ‘short the sh*t out of it’. I think I know what that means – and it still sounds eminently sensible from where I’m sitting.

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