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Real Time – Tech Bubble Talk

When will the ‘ tech bubble ‘ burst ?First LinkedIN goes public, then the Russian search engine, Yandex. Now it’s Zynga, Facebook and Twitter very likely to follow with their initial public offerings for later this year. 

I personally do not believe any of these companies are DIRECTLY part of the tech bubble. They all seem to have sustainable, valid business models with room for growth and development. I don’t necessarily disagree with their current valuations either. What I do disagree with is the timeline and manner in which their valuations have been determined. LinkedIn, pre – IPO, goes from $35 shortly before the IPO, $45 at the opening of the IPO, then jumps to settle at around  $85 at the end of its first day of trading publicly. That $85 price more than doubled the pre – IPO valuation of $35. Then Yandex’s pre-IPO expected range was at $20-22, priced at $25 and saw the shares rise 55 % the first day. The end of the first days’ post IPO valuation amounts to an approximate 80% increase over the pre – IPO valuation at $20 -$22.

One could argue that part of an investment bank’s job and responsibility as an underwriter for a company going public is to determine an accurate and precise market price for the IPO stock in question as well as being a ‘market maker’ ( finding buyers willing to invest at those prices. ) One could also argue that a run – up in valuation of the IPO of a tech stock ( especially social media ) fuels the fire of an impending tech bubble to burst sometime in the near future.

It’s some of these other tech companies not listed above with impending IPOs and / or tremendous valuations that I am worried about; especially in regards to social media. Don’t get me wrong, I am a big fan of technology and social media personally and as a viable and growing investment sector / industry. The main concern I have in regards to social media industry ( therefore technology as well ) is the number of companies whose business models are based on an independent social media platform, instead of adding on to the platform of an existing top-tier or second tier social media company.

What about the possibility of impending “do not track” and internet privacy concerns and legislation being discussed in the U.S. as well as many other countries. The other related concern is the hype that these social media / tech -related company valuations ( actual and potential )  have added to the tech industry as a whole.

How many separate social media platforms are you on now? Yes … you. How many do you think you will be on after the next two years, if there is even a slight amount of “do not track” policy ( or consumer friendly and popular “do not track” software that comes to market ) or internet privacy policy that is enacted as legislation.

Think about it … We’ll see what happens.

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About Neven's Blog

My blog focuses on FINANCIAL MARKET ANALYSIS & INSIGHT from a macro as well as a micro - level point of view. The information is straight forward, honest, simplifies complex matters, questions some oversimplified matters, all while being as easy as possible for readers to understand. I primarily focus on capital and currency markets by combining insights, analysis & ideas from the fields of finance, economics and geopolitics.


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