Dot Com Bust 2.0?
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
This year Facebook is set to IPO making its founders and early employees insanly rich, in fact an artist named David Choe who was paid in Facebook stock for painting a wall at the Facebook headquarters is set to become a multi-millionare. Facebook is not the only web 2.0 company that is planning to go public or has gone public. YELP!, AVG Technologies, Zynga Inc (NASDAQ: ZNGA), Angie's List Inc, Groupon Inc (NASDAQ: GRPN), Carbonite Inc, Zillow Inc and Pandora Media Inc are all tech companies that have gone public in the past year, and there are others.
There have been more high profile tech IPO's in the past year than there have been since the dot com bust of the early 2000's. Other signs that point to a bubble forming in silicon valley are the high profile expensive take overs and valuations of start ups. Facebook recently bought InstaGram for one billion dollars in stock and cash. This deal was said to come together in a matter of a few days and was the brain child of Facebook founder Mark Zuckerberg. This happened only a short time after InstaGram was valued at half of one billion dollars.
Not long ago OMGPOP was aquired by Zynga Inc for a rumored $200 million if not a little higher. Now you probably haven't heard of OMGPOP, but like me if you've ever been bored in your accounting class or for that matter been bored anywhere you may have played their only really successful game "Draw Something" for Android and iOS. This single mobile game was enough of a sucess for Zynga Inc, which is a very young company in it's own right to snap it up despite other popular games such as Farmville.
"Acqhires" have also become popular in the valley. This is when a company buys a smaller company not for the company itself but for its employees or potentially just a single employee. Sometimes the service that the aquired company made is shut down, sometimes it is not. Groupon Inc recently spent $10-20 million acqhiring Uptake, an online travel service. Groupon was more interested in the twenty person staff of Uptake than the service.
Speaking of Groupon Inc, the companies stock has now dropped by over 50% since its IPO and is now trading close to the six billion dollar value that Google offered to aquire the company before it went public. At this point in time Groupon may be wishing that they accepted Google's takeover bid as they have had a lot of not so positive press since they launched and their stock has taken a beating. This initial stock pop and then slow decline may be the name of the game for the wave of tech IPO's that we are currently playing.
In summary, Silicon valley is heating up once more and as a wave of tech companies go public and valuations skyrocket in 2012, I believe that we will enter another tech bubble.
ded004 has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
