The bubble decade: Lessons to remember

When the dawn of new decade is celebrated, we will be saying good bye to 10 tumultuous years in the world of business. Years marked by innovation and ambition. It was the decade that saw the rise of Google and the fall of Lehman, the emergence of China and the weakening of America as an economic power. The financial story of the past decade is best told as a story about bubbles ending in depths of terrible recession and beginning at the hype of dot com euphoria.

Experts discuss the turbulence, the triumphs and the lesson learned from ‘THE BUBBLE DECADE’.

It was one of the greatest speculative  bubble that the stock market had ever seen and it reached its eight packs with a handshake on the 10th day of the new millennium, as Steve Case and Jerry Levin announced that AOL the best known internet company of the 1990’s was buying Time Warner for USD 180 billion. It was coming off age moment for the internet era and an upstart just out of its infancy buying a pillar of the old media establishment with brands like Time Magazine, CNN and Warner brothers.

As an analyst following internet stocks in the 1990’s Jonathan Cohen thought he had seen it all but this deal at the start of the new decade startled even him.

Below is a verbatim transcript:

Q: January of 2000, AOL announces it’s acquiring Time Warner, what did you think when you heard that?

Cohen: I mostly thought that it’s a great deal for AOL and it’s a horrible deal for Timer Warner. This new company will define what we called in our press release the internet century.

But before it was clear that the biggest deal in history would go down as its worst. Internet fever would only grow. Two months after AOL-Time Warner merger was announced the Nasdaq market where most tech company shares were traded, hit a high of 5,048. It had nearly tripled in 3 years as the suspension of the disbelief grew.

From 1998- 2000 nearly 1,500 technology companies went public raising a USD 114 billion that avalanche of capital was laid at the doorsteps of countless companies, whose businesses would never turn a profit but that did not stop them from taking it.

iVillage a website catering to women was one of them; Robert Levitan co-founded the company and remembers the mania that greeted its initial public offering in 1999.

Levitan: They were supposed the price at 12, it went out at 24 and it went high of 130 on day one, and on day one it went out and it was worth a billion dollars.

Q: So it was five fold worth of what the underwriters thought it was worth when they priced it?

Levitan: Yes.