Editing Dot-com bubble (section)

==The bubble==
As a result of these factors, many investors were eager to invest, at any valuation, in any [[dot-com company]], especially if it had one of the [[Internet-related prefixes]] or a "[[.com]]" [[suffix]] in its name. [[Venture capital]] was easy to raise. [[Investment bank]]s, which profited significantly from [[initial public offering]]s (IPO) (almost all of them were on Nasdaq), fueled speculation and encouraged investment in technology.<ref name=swindle /> A combination of rapidly increasing stock prices in the [[quaternary sector of the economy]] and confidence that the companies would turn future profits created an environment in which many investors were willing to overlook traditional metrics, such as the [[price–earnings ratio]], and base confidence on technological advancements, leading to a [[stock market bubble]].<ref name=enigma>{{cite journal |last1=Teeter |first1=Preston |last2=Sandberg |first2=Jorgen |year=2017 |title=Cracking the enigma of asset bubbles with narratives |journal=Strategic Organization |volume=15 |issue=1 |pages=91–99 |doi=10.1177/1476127016629880|s2cid=156163200 }}</ref> Between 1995 and 2000, the Nasdaq Composite stock market index rose 400%. It reached a price–earnings ratio of 200, dwarfing the peak price–earnings ratio of 80 for the Japanese [[Nikkei 225]] during the [[Japanese asset price bubble]] of 1991.<ref name=enigma/> In 1999, shares of [[Qualcomm]] rose in value by 2,619%, 12 other large-cap stocks each rose over 1,000% in value, and seven additional large-cap stocks each rose over 900% in value. Even though the Nasdaq Composite rose 85.6% and the [[S&P 500]] rose 19.5% in 1999, more stocks fell in value than rose in value as investors sold stocks in slower growing companies to invest in Internet stocks.<ref>{{cite news |url=https://www.nytimes.com/2000/01/03/business/the-year-in-the-markets-1999-extraordinary-winners-and-more-losers.html |title=THE YEAR IN THE MARKETS; 1999: Extraordinary Winners and More Losers |first=Floyd |last=Norris |author-link=Floyd Norris |work=[[The New York Times]] |date=January 3, 2000 |access-date=August 26, 2017 |archive-date=August 31, 2017 |archive-url=https://web.archive.org/web/20170831061735/http://www.nytimes.com/2000/01/03/business/the-year-in-the-markets-1999-extraordinary-winners-and-more-losers.html |url-status=live }}</ref>

An unprecedented amount of personal investing occurred during the boom and stories of people quitting their jobs to trade on the financial market were common.<ref>{{cite magazine |url=http://content.time.com/time/magazine/article/0,9171,991726,00.html |title=Day Trading: It's a Brutal World |first=Daniel |last=Kadlec |magazine=[[Time (magazine)|Time]] |date=August 9, 1999 |url-access=subscription |access-date=April 14, 2017 |archive-date=April 15, 2017 |archive-url=https://web.archive.org/web/20170415200633/http://content.time.com/time/magazine/article/0,9171,991726,00.html |url-status=live }}</ref> The [[news media]] took advantage of the public's desire to invest in the stock market; an article in ''[[The Wall Street Journal]]'' suggested that investors "re-think" the "quaint idea" of profits,<ref>{{cite news | url=https://www.wsj.com/articles/SB9270768713268007 | title=Companies Chose to Rethink A Quaint Concept: Profits | first=Bernard | last=Wysocki | work=[[The Wall Street Journal]] | date=May 19, 1999 | url-access=subscription | access-date=August 8, 2021 | archive-date=August 8, 2021 | archive-url=https://web.archive.org/web/20210808220858/https://www.wsj.com/articles/SB9270768713268007 | url-status=live }}</ref> and [[CNBC]] reported on the stock market with the same level of suspense as many networks provided to the [[broadcasting of sports events]].<ref name=enigma/><ref>{{cite book |url=https://archive.org/details/originsofcrashgr00roge |url-access=registration |title=Origins of the Crash: The Great Bubble and Its Undoing |first=Roger |last=Lowenstein |author-link=Roger Lowenstein |publisher=[[Penguin Books]] |year=2004 |isbn=978-1-59420-003-8 |page=[https://archive.org/details/originsofcrashgr00roge/page/115 115]}}</ref>

At the height of the boom, it was possible for a promising dot-com company to become a [[public company]] via an IPO and raise a substantial amount of money even if it had never made a profit—or, in some cases, realized any material revenue or even have a finished product. People who received [[employee stock option]]s became instant paper millionaires when their companies executed IPOs; however, most employees were barred from selling shares immediately due to [[lock-up period]]s.<ref name="swindle">{{cite book |url=https://books.google.com/books?id=GoDuPQAACAAJ |title=Totally Wired: On the Trail of the Great Dotcom Swindle |author-link=Andrew Smith (author) |first=Andrew |last=Smith |publisher=[[Bloomsbury Books]] |year=2012 |isbn=978-1-84737-449-3 |access-date=2017-05-08 |archive-date=2020-08-01 |archive-url=https://web.archive.org/web/20200801023652/https://books.google.com/books/about/Totally_Wired.html?id=GoDuPQAACAAJ |url-status=live }}</ref>{{page needed|date=January 2019}} The most successful entrepreneurs, such as [[Mark Cuban]], sold their shares or entered into [[Hedge (finance)|hedges]] to protect their gains. [[Sir John Templeton]] successfully [[short (finance)|shorted]] many dot-com stocks at the peak of the bubble during what he called "temporary insanity" and a "once-in-a-lifetime opportunity". He shorted stocks just before the expiration of lockup periods ending six months after initial public offerings, correctly anticipating many dot-com company executives would sell shares as soon as possible, and that large-scale selling would force down share prices.<ref>{{Cite news | url=https://www.marketwatch.com/story/john-templeton-profited-from-temporary-insanity-in-2000-now-its-your-turn-says-longtime-money-manager-2019-05-09 | title=John Templeton profited from 'temporary insanity' in 2000 — now it's your turn, says longtime money manager | first=Shawn | last=Langlois | work=[[MarketWatch]] | date=May 9, 2019 | url-access=subscription | access-date=2021-04-03 | archive-date=2020-07-31 | archive-url=https://web.archive.org/web/20200731142657/https://www.marketwatch.com/story/john-templeton-profited-from-temporary-insanity-in-2000-now-its-your-turn-says-longtime-money-manager-2019-05-09 | url-status=live }}</ref><ref>{{Cite news | url=https://www.forbes.com/forbes/2001/0528/054.html | title=Old Dog, New Tricks | work=[[Forbes]] | date=May 28, 2001 | url-access=subscription | access-date=April 3, 2021 | archive-date=March 7, 2021 | archive-url=https://web.archive.org/web/20210307040731/https://www.forbes.com/forbes/2001/0528/054.html | url-status=live }}</ref>

===Spending tendencies of dot-com companies===
{{Multiple image
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| image1            = Modo Promo CD.png
| image2            = Pets.com sockpuppet.jpg
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| footer            = Dot-com companies spent most of their investments in marketing efforts. Left: A promotional music CD for the [[Modo (wireless device)|Modo]] pager. Right: The [[Pets.com]] sock puppet
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Most dot-com companies incurred [[net operating loss]]es as they spent heavily on advertising and promotions to harness [[network effect]]s to build [[market share]] or [[mind share]] as fast as possible, using the mottos "get big fast" and "get large or get lost". These companies offered their services or products for free or at a discount with the expectation that they could build enough [[brand awareness]] to charge profitable rates for their services in the future.<ref name=lessons>{{cite news |url=https://www.nytimes.com/2008/11/23/business/23proto.html |title=Lessons of Survival, From the Dot-Com Attic |first=LESLIE |last=BERLIN |work=[[The New York Times]] |date=November 21, 2008 |access-date=August 26, 2017 |archive-date=September 6, 2017 |archive-url=https://web.archive.org/web/20170906100917/http://www.nytimes.com/2008/11/23/business/23proto.html |url-status=live }}</ref><ref>{{cite news |url=https://www.wsj.com/articles/SB958412442522904320 |title=MotherNature.com's CEO Defends Dot-Coms' Get-Big-Fast Strategy |first=John |last=Dodge |work=[[The Wall Street Journal]] |date=May 16, 2000 |url-access=subscription |access-date=April 14, 2017 |archive-date=April 15, 2017 |archive-url=https://web.archive.org/web/20170415200406/https://www.wsj.com/articles/SB958412442522904320 |url-status=live }}</ref>

The "growth over profits" mentality and the aura of "[[new economy]]" invincibility led some companies to engage in lavish spending on elaborate business facilities and luxury vacations for employees. Upon the launch of a new product or website, a company would organize an expensive event called a [[dot-com party]].<ref>{{cite news |url=https://www.salon.com/2000/04/25/party_5/ |title=Dot-com party madness |first=Damien |last=Cave |work=[[Salon (website)|Salon]] |date=April 25, 2000 |access-date=March 8, 2018 |archive-date=March 9, 2018 |archive-url=https://web.archive.org/web/20180309001604/https://www.salon.com/2000/04/25/party_5/ |url-status=live }}</ref><ref>{{cite news |url=https://www.latimes.com/archives/la-xpm-2000-dec-25-mn-4559-story.html |title=Dot-Com Parties Dry Up |first=P.J. |last=HuffStutter |work=[[Los Angeles Times]] |date=December 25, 2000 |access-date=February 10, 2020 |archive-date=June 13, 2020 |archive-url=https://web.archive.org/web/20200613132107/https://www.latimes.com/archives/la-xpm-2000-dec-25-mn-4559-story.html |url-status=live }}</ref>

===Bubble in telecom===
In the five years after the American [[Telecommunications Act of 1996]] went into effect, [[telecommunications equipment]] companies invested more than $500 billion, mostly financed with debt, into laying fiber optic cable, adding new switches, and building wireless networks.<ref name="now">{{cite news | url=https://www.brookings.edu/research/the-telecommunications-crash-what-to-do-now/ | title=The Telecommunications Crash: What To Do Now? | first=Robert E. | last=Litan | work=[[Brookings Institution]] | date=December 1, 2002 | access-date=March 30, 2018 | archive-date=March 30, 2018 | archive-url=https://web.archive.org/web/20180330212743/https://www.brookings.edu/research/the-telecommunications-crash-what-to-do-now/ | url-status=live }}</ref> In many areas, such as the [[Dulles Technology Corridor]] in Virginia, governments funded technology infrastructure and created favorable business and tax law to encourage companies to expand.<ref>{{cite magazine |last1=Donnelly |first1=Sally B. |last2=Zagorin |first2=Adam |url=http://content.time.com/time/magazine/article/0,9171,52073-2,00.html |title=D.C. Dotcom |magazine=[[Time (magazine)|Time]] |date=August 14, 2000 |url-access=subscription |access-date=February 10, 2020 |archive-date=June 7, 2020 |archive-url=https://web.archive.org/web/20200607165730/http://content.time.com/time/magazine/article/0,9171,52073-2,00.html |url-status=live }}</ref> The growth in capacity vastly outstripped the growth in demand.<ref name="now" /> [[Spectrum auction]]s for [[3G]] in the United Kingdom in April 2000, led by [[Chancellor of the Exchequer]] [[Gordon Brown]], raised £22.5 billion.<ref>{{cite news | url=http://news.bbc.co.uk/1/hi/business/727831.stm | title=UK mobile phone auction nets billions | work=[[BBC News]] | date=April 27, 2000 | access-date=June 7, 2020 | archive-date=August 23, 2017 | archive-url=https://web.archive.org/web/20170823181352/http://news.bbc.co.uk/1/hi/business/727831.stm | url-status=live }}</ref> In Germany, in August 2000, the auctions raised £30 billion.<ref>{{cite news | url=https://www.theguardian.com/technology/2000/nov/17/citynews.business | title=Consumers pay the price in 3G auction | first=Andrew | last=Osborn | work=[[The Guardian]] | date=November 17, 2000 | access-date=June 7, 2020 | archive-date=June 7, 2020 | archive-url=https://web.archive.org/web/20200607165736/https://www.theguardian.com/technology/2000/nov/17/citynews.business | url-status=live }}</ref><ref>{{Cite news | url=https://money.cnn.com/2000/08/17/europe/german_umts/index.htm | title=German phone auction ends | work=[[CNN]] | date=August 17, 2000 | access-date=June 7, 2020 | archive-date=June 7, 2020 | archive-url=https://web.archive.org/web/20200607165726/https://money.cnn.com/2000/08/17/europe/german_umts/index.htm | url-status=live }}</ref> A 3G [[spectrum auction]] in the United States in 1999 had to be re-run when the winners defaulted on their bids of $4 billion. The re-auction netted 10% of the original sales prices.<ref>{{cite news | url=https://www.theguardian.com/technology/2000/apr/13/mobilephones.victorkeegan | title=Dial-a-fortune | first=Victor | last=Keegan | work=[[The Guardian]] | date=April 13, 2000 | access-date=June 7, 2020 | archive-date=February 5, 2021 | archive-url=https://web.archive.org/web/20210205054229/https://www.theguardian.com/technology/2000/apr/13/mobilephones.victorkeegan | url-status=live }}</ref><ref>{{cite news | url=https://www.livemint.com/Opinion/FRQGcvIClZDzCS6EK0Cq4I/Views--Policy-lessons-from-the-3G-failure.html | title=Policy lessons from the 3G failure | first=R. | last=Sukumar | work=[[Mint (newspaper)|Mint]] | date=April 11, 2012 | access-date=June 7, 2020 | archive-date=June 7, 2020 | archive-url=https://web.archive.org/web/20200607165726/https://www.livemint.com/Opinion/FRQGcvIClZDzCS6EK0Cq4I/Views--Policy-lessons-from-the-3G-failure.html | url-status=live }}</ref> When financing became difficult to obtain as the bubble burst, high [[debt ratio]]s of some companies led to a number of [[bankruptcy|bankruptcies]].<ref>{{Cite news | url=https://www.telegraph.co.uk/finance/2837764/Telecoms-crash-like-the-South-Sea-Bubble.html | title=Telecoms crash 'like the South Sea Bubble' | first=Dominic | last=White | work=[[The Daily Telegraph]] | date=December 30, 2002 | url-access=subscription | access-date=June 7, 2020 | archive-date=June 7, 2020 | archive-url=https://web.archive.org/web/20200607170853/https://www.telegraph.co.uk/finance/2837764/Telecoms-crash-like-the-South-Sea-Bubble.html | url-status=live }}</ref> Bond investors recovered just over 20% of their investments.<ref>{{Cite news | url=https://www.houstonchronicle.com/business/energy/article/Oil-bust-on-par-wit-telecom-crash-of-dot-com-era-9218492.php | title=Oil bust on par with telecom crash of dot-com era | first1=David | last1=Hunn | first2=Collin | last2=Eaton | work=[[Houston Chronicle]] | date=September 12, 2016 | access-date=June 7, 2020 | archive-date=June 7, 2020 | archive-url=https://web.archive.org/web/20200607165728/https://www.houstonchronicle.com/business/energy/article/Oil-bust-on-par-wit-telecom-crash-of-dot-com-era-9218492.php | url-status=live }}</ref> However, several telecom executives sold stock before the crash including [[Philip Anschutz]], who reaped $1.9 billion, [[Joseph Nacchio]], who reaped $248 million, and [[Gary Winnick]], who sold $748 million worth of shares.<ref>{{cite news | url=https://www.bloomberg.com/news/articles/2002-08-04/inside-the-telecom-game | title=Inside the Telecom Game | work=[[Bloomberg Businessweek]] | date=August 5, 2002 | url-access=subscription | access-date=2020-06-07 | archive-date=2020-06-07 | archive-url=https://web.archive.org/web/20200607165728/https://www.bloomberg.com/news/articles/2002-08-04/inside-the-telecom-game | url-status=live }}</ref>