I lived through it once. I don't want it to happen again and I will do anything in my power to try to stop it. I'm talking about the craziness of 1999-2000 and how it wiped out a whole generation of investors. I vowed back then that I would do my best to educate everyone, the investors, the brokers, the syndicate desks, even the SEC, about how things got out of control and how we must get them back on track before too much money is lost in the denouement.
So, let me tell you what happened then and what's happening now, and how history does not have to repeat itself.
The one word that captures that era and is beginning to represent this moment is mania.
The mania back then began on January 15, 1999. We had a decent market, not great, when marketwatch.com came public in a deal that shocked Wall Street. The website, with a couple of million viewers, offered a small amount of stock at $17 and after a prolonged attempt to open, just like Airbnb (ABNB) , the stock went to $97.5 up 474%, after trading as high as 665%.
At the end of November of 1997, an outfit called theGlobe.com has a similar jaunt, gaining 605% the first day but that was considered an aberration.
The MarketWatch deal made it real clear that theGlobe.com's move wasn't one off. It was the signal that something very strange was going on: the public, which hadn't been all that important in the IPO market, suddenly decided that the easy money was coming from IPOs and they wanted in.
As someone who was running a competitor, thestreet.com, I took a keen interest in what happened and I can tell you that, like now, individual investors, not schooled in the ways of Wall Street, came in with market orders to buy because they liked the site itself, just like investors now like Airbnb or DoorDash (DASH) . The two deals that told you that Snowflake (SNOW) , like Theglobe.com, was not aberrant. It was the norm.
Now, not for a moment do I want to compare the actual companies. MarketWatch was a terrific property, a trailblazer, but it's no DoorDash or Airbnb when it comes to size, scale and success although they were all money losers when they came public.
The point is that, right then and there, the heads of the big firms should have sat down with the SEC and said, "We've got a problem on our hands. The rules don't give us the flexibility to offer a lot more stock to meet the demand when the public comes in full force. Let us go to the selling shareholders and the company and free up more stock to create an orderly market. "
They never did it.
It's imperative that they do it now. There has to be some sort of way that, on the fly, more stock can be issued to meet demand and tamp the craziness that is brought on by individuals en masse using market orders to buy stocks way higher than they should be.
Why should we care? Because in just a few months, individuals will be able to take advantage of these prices and file gigantic amounts of stock that will clobber the current shareholders.
Now I saw this happen when market buyers came in and took thestreet.com's offering at $19 and it roared to the $60s. I wanted more stock to be released somewhere, anywhere, to keep the stock down so I didn't disappoint people. They said their hands were tied. They said they were completely unprepared for the public's participation in the deal. I screamed that how could they not know that after what happened with our competitor, marketwatch.com. They were blissfully ignorant. I told them that I wasn't the expert in going public they were. How could they be so wrong. Their answer was basically "So what. Everybody's making money."
I hated them for their thoughtlessness and their arrogance. This is what they did for a living and they didn't think anything was wrong. We got more and more deals like this over that year, with the quality going down almost every week. And then the lock-ups started expiring and insiders cashed in on hundreds of what ultimately were worthless companies and the public was left holding the bag.
There was a lot of chicanery back then. I'm not talking about that. What I am saying is that, once again, there is blissful ignorance. So history will repeat itself if we don't fix the IPO market with a flexible safety valve of stock to sate the transom individuals.
I say the SEC should call a meeting right now with the big firms and say that they will give the syndicate desks the ability to call an audible and unlock stock to keep the public from mistakenly setting the wrong price with market orders. Unless they do so, this will go on, we will have fun and then the edifice will topple and boom will turn into a bust and your money into dust.