For same amount of money Facebook could have bought American Airlines and Dunkin' Donuts and still had $2 billion left over to play with.
If WhatsApp was making lots of money this would still be notable. However, WhatsApp doesn't even have a clear business model.
Maybe Mark Zuckerberg looks at dollars the same way the rest of view Monopoly money then this would be one thing.
Nevertheless, things are getting strange out in Silicon Valley again.
15 years later the price of tech stocks are extremely expensive again.
Public valuations for Internet and related hot tech companies are, once again, unjustifiably sky high. LinkedIn’s (LNKD) price-to-earnings ratio is 942. Guidewire Software’s (GWRE) P/E is 782. Amazon’s (AMZN) is 632. Netflix’s (NFLX) is 245. Facebook’s (FB) is 116. Twitter (TWTR) has a $30 billion market cap with no earnings and whopping price-to-sales multiple of 44.Let's take a moment to examine Twitter.
Last year it did an IPO and its stock price increased 70% on the first day. Is that because its price was undervalued?
This company lost more money in 2013 than it did in 2012.Twitter has never made a dime of profit. Ever.
Twitter’s loss per share in 2013 amounted to $3.41 compared to a loss of $0.68 in 2012.
What's more, the IPO's are rolling in.
Tech IPOs are just beginning to heat up. According to CB Insights, 600 startups in the IPO pipeline have raised more than $55 billion – that’s nearly $100 million apiece. And 47 venture-backed companies – including Palantir, Pinterest, Box, Spotify, Fab, and Square – are valued at more than a billion dollars.Last year 64% of IPO's were for profitless companies, that is only beaten by Year 2000.
Coupons.com, with Goldman Sachs as its lead underwriter, raised $168 million, selling 10.5 million shares for $16 each. And the stock rose as much as 103 percent to $32.43, making it today's biggest gainer by far. If that doesn't remind you of 1999, then you probably weren't following the stock market back then.What's really disturbing about this is that Coupon.com has a very similar business model to Groupon.com, who still hasn't been able to turn a profit in the two years since its IPO. Yet Wall Street bought up Coupons.com anyway.
The company has about a $2.3 billion stock-market value, which is more than 13 times its $167.9 million of revenue last year, when its net loss was $11.2 million. But like so many other companies in these golden times, Coupons.com simply told investors to exclude about $13 million of normal everyday expenses and, abracadabra, it claims to be profitable on a nonstandard, cockamamie "adjusted Ebitda" basis. It's all part of the show.
Coupons.com has been a net money loser since its creation in 1998.
“The real question is whether a crash will occur now or after the markets rise another 30 percent.”
- Ian D’Souza
This is not to say that we have reached the crazytown levels of year 2000. Most stocks are not so overpriced, and the general public involvement is much, much lower.
A good comparison chart is here.
But you have to keep in mind that the Year 2000 numbers were extreme insanity numbers. It's a logical fallacy to think that we need to match those numbers in order to qualify for a bubble. We don't.
While we don't live in crazytown, we do live next door to it.
We should note that history doesn't repeat, but it rhymes. The Bitcoin Mania seems like a good example of "different but the same", in that we are still talking about a tech mania bubble but unlike the last one.
This Dot-Com bubble isn't a general stock bubble like in 2000. Unlike 15 years ago, the average retail investor has sat out this stock market bull, after getting crushed twice in eight years.
The wealthiest 10 percent of families earn 11 percent of their annual income from capital gains, interest and dividends, according to the Fed. The poorest three-quarters get less than 0.5 percent of their income from such sources.So if the retail investor is sitting this one out, how are the wealthy compensating for the lack of "dumb money"? They are doing it with debt. A record amount of margin debt.
“Many moderate- and middle-income households have seen little benefit from recent stock market gains and are still grappling with the implications of home prices that, despite recent progress, remain well below their previous highs,” the White House economic team wrote in a March 10 blog post.
Margin debt hit a record $451 billion on the New York Stock Exchange in January, as investors borrowed more money than ever to buy into the post-financial-crisis bull market.
And that’s a good thing, for now. But rapidly rising margin debt can also signal a market top, especially if the rate of borrowing starts to drop below its 12-month average. That was a strong signal to get out of the stock market in late 1999 and 2007 — if 0nly investors had been able to see the data in real time. The NYSE margin statistics are released after a six-week delay.
Thus, when this bubble bursts, it will happen fast. When I say fast, I mean so extremely fast that even the insiders won't be able to get out.