WRITTEN BY- DEVANSH KAWATRA
The dot com bubble was similar to an asset bubble that took place in the united states. an asset bubble or an economic bubble is when there is a huge increase in the market. it was mainly based on speculation of internet companies that were just popping up on the internet and the investors went crazy for these companies in the hope that they would expand and get them huge profits it did get them profits but because of the low-interest rates in 1998, it also helped in expanding this bubble to a huge extent. this mainly happened because of the introduction of the internet that these new companies started coming up because these concepts of shopping off the internet were all new to all of them, so they invested such a huge amount of money in these companies. some companies that were the main part of this bubble were pricefly.com, amazon, coupons.com, and Shutterfly. Nasdaq rose from about 1000 dollars to 5000. IPOs of new companies were coming in every day and people kept on investing thinking that this is the best investment. this bubble encouraged entrepreneurship in a country that had never been seen. losing money had become a trademark for these dot com companies. by the year 1999 people were beginning to realize that there was a bubble the only question that they had was the extent of it and how much damage it could cause if it was popped. by 2000 as soon as NASDAQ peaked it lost its value by 35 per cent and this was the sign that the people should have taken to disinvest in this bubble.
The release of internet browsers such as mosaic and Netscape also contributed to the bubble. there was the boom stage of this bubble in 1990 and the bubble started bursting around the 2000s. as soon as the bubble started bursting. the NASDAQ composite index hit a high of 5000 and Japan had again entered recession, which triggered a huge sell-off of stocks and affected technological stocks the most. Yahoo and eBay ended merger talks and NASDAQ fell even more. Due to this people shifted from investing their money in tech companies and started investing in poorly performing companies. Many people were forced to sell their shares to pay taxes. the overview of the losses for the country, the people, and the economy was around 9 trillion USD. This led to a lot of things like new acts being passed, many jobs were lost in the technology sector during this bubble. This marked the start of a bear market. the NASDAQ that increased so much had almost dropped 77 per cent. the bubble also causes many companies to go bust. some companies that survived this were Amazon and eBay. The deal that saved amazon from the crash was the newly appointed CFO warren Jenson thought that the company didn't have enough cash to survive. so he sold convertible bonds to overseas investors for around 600 million. This was how warren Jenson saved the company from where we shop every day. trillions of dollars were lost in the market coupled with the 9/11 attacks the people were to see a thing of this huge extent take place.
The 9/11 attacks made the market go on even more than before, which most people trust, and the market entered a recession. however, it seems that the world has already learned its lesson from the first internet bubble but 4 major companies could contribute to another dot com bubble these companies are used by people in their daily lives. the names are Facebook, Twitter, Groupon, and LinkedIn. let's talk about one of these companies like Twitter, essentially twitter is a Ponzi scheme. a Ponzi scheme is is that it is a type of fraud where the scheme brings an opportunity to the investors that are irresistible and not only promises high returns but guarantees it.in LinkedIn when its IPO was introduced it traded for 45 and now it is trading at 90 that means that investors expect a huge return from this company and this was also the case during the first bubble where people had invested in speculation that had led to led recession if this continues we might face another drop very soon. Groupon is a company that provides del of the day and other coupons like coupons.com most people or companies that use it say that they wouldn't use it anymore which means if people were to invest in it they would for sure face losses. how to prevent this from happening - we should not judge a company by its popularity and recklessly invest in it, do not invest in speculation, the company should have a sound business model and fundamentals of business are important.
