Recommended
Recommended
More Related Content
Similar to Dot Com Boom Bust
Similar to Dot Com Boom Bust (20)
Recently uploaded
Recently uploaded (20)
Dot Com Boom Bust
- 1. Dot Com Boom and Bust
- 2. Dot Com Bubble (2000) • During the late 20th century, the Internet created a euphoric attitude toward business and inspired many hopes for the future of online commerce. • For this reason, many Internet companies (known as “dot-coms”) were launched, and investors assumed that a company that operated online was going to be worth millions. • But, obviously, many dot-coms were not rip-roaring successes, and most that were successful were highly overvalued. • As a result, many of these companies crashed, leaving investors with significant losses. • The market crash cost investors around $8 trillion.
- 3. Factors That Led to the Dot-Com Bubble Burst • The Use of Metrics That Ignored Cash Flow. • Significantly Overvalued Stocks.
- 4. Dot Com Bubble (2000) • The world’s largest bank, HSBC Holdings, conducted research on the P/E ratios of newer, tech-savvy companies. • According to their findings, these newer companies were overvalued by 40%. • In fact, the only way these stocks could have been properly valued would be if their revenues grew by 80% a year for five years. • However, this would probably have been an impossible standard for any company to meet, given that even Microsoft only averaged a little over 50% a year.
- 5. • Survivors of Dot Com Bust • Amazon • E-bay • Yahoo • On 2003, Amazon had its first year with a full year of profit.
- 6. Netpliance • Produced low-cost web-only computers • Sold its I-Opener internet appliance for $99 • Had 49,400 internet subscriptions in September, 2000 • Went public in March 2000 • Started at $18 a share • Reached $26 a share • Declined to 34¢ a share by December 2000
- 7. Webvan.com • Online grocery store • Founded in 1999 • Raised $375 million at its November 1999 IPO • Attracted major investors • Goldman Sachs • Benchmark • Yahoo! • At its height in late 1999: • Valued at $1.2 billion • Employed 4,500 people • Throughout 2000, Webvan expanded rapidly • Spent $800 million • Extended into 8 cities in 18 months • Planned to extend into 26 more cities in 2001 • Acquired its competitor HomeGrocer • The company expanded too fast • In July 2001, it filed for bankruptcy • Laid off 2,000 employees • Shares dropped to only 6¢ • According to CNN Money, it was the most costly dot-com failure
- 8. Flooz.com • Online payment platform • Participating stores took Flooz online currency • Barnes & Noble • Tower Records • Restoration Hardware • Outpost.com • Corporate partners used Flooz online currency for corporate gifts • Cisco • Delta Airlines • Founded in 1999 • Raised $35 million through investors • Within 18 months, had sales of $30 million • Spent $8 million on a single ad campaign featuring Whoopi Goldberg • The Russian mob discovered Flooz • They started laundering money with stolen credit card numbers • This led the company to shut down in August 2001 • Went from profitability to owing $4 million in 2 months • Historic bankruptcy • Largest in terms of creditors: 325,000 • First time email was used as legal communication • Incident led to the 3-digit security codes on the back of credit cards to be required for online transactions