1. Market Crashes: Introduction
  2. Market Crashes: What are Crashes and Bubbles?
  3. Market Crashes: The Tulip and Bulb Craze
  4. Market Crashes: The South Sea Bubble
  5. Market Crashes: The Florida Real Estate Craze
  6. Market Crashes: The Great Depression (1929)
  7. Market Crashes: The Crash of 1987
  8. Market Crashes: The Asian Crisis
  9. Market Crashes: The Dotcom Crash
  10. Market Crashes: Housing Bubble and Credit Crisis (2007-2009)
  11. Market Crashes: Conclusion

By Andrew Beattie

When: March 11, 2000 to October 9, 2002
Where: Silicon Valley (for the most part)

Percentage Lost From Peak to Bottom: The Nasdaq Composite lost 78% of its value as it fell from 5046.86 to 1114.11.

Synopsis: Decades before the word "dotcom" slipped past our lips as the answer to all of our problems, the internet was created by the U.S. military, who vastly underestimated how much people would want to be online. Commercially the internet started to catch on in 1995 with an estimated 18 million users. The rise in usage meant an untapped market--an international market. Soon, speculators were barely able to control their excitement over the "new economy."

Companies underwent a similar phenomenon to the one that gripped Seventeenth century England and America in the early eighties: investors wanted big ideas more than a solid business plan. Buzzwords like networking, new paradigm, information technologies, internet, consumer-driven navigation, tailored web experience, and many more examples of empty double-speak filled the media and investors with a rabid hunger for more. The IPOs of internet companies emerged with ferocity and frequency, sweeping the nation up in euphoria. Investors were blindly grabbing every new issue without even looking at a business plan to find out, for example, how long the company would take before making a profit, if ever.

Obviously, there was a problem. The first shots through this bubble came from the companies themselves: many reported huge losses and some folded outright within months of their offering. Siliconaires were moving out of $4 million estates and back to the room above their parents' garage. In the year 1999, there were 457 IPOs, most of which were internet and technology related. Of those 457 IPOs, 117 doubled in price on the first day of trading. In 2001 the number of IPOs dwindled to 76, and none of them doubled on the first day of trading.

Many argue that the dotcom boom and bust was a case of too much too fast. Companies that couldn't decide on their corporate creed were given millions of dollars and told to grow to Microsoft size by tomorrow.

Market Crashes: Housing Bubble and Credit Crisis (2007-2009)

Related Articles
  1. Investing

    Tech Bubbles: How the Dot-Com Era Differs From 2016 (AAPL, CSCO)

    Pay attention to the escalating valuations of pre-IPO companies in 2016, as several will rise above the $10 billion level before going public.
  2. Investing

    3 Large-Cap Stocks That Are Still Far From Their Dot-Com Bubble (CSCO, INTC)

    Review three large-cap technology stocks that were among the biggest names in the sector in the dot-com era but are still far from their highs in 2000.
  3. Small Business

    Investing in the Inner Workings of the Internet (CSCO, HPQ)

    A guide for investors looking to bet on the companies that enable the Internet's inner workings
  4. Financial Advisor

    Is the Stock Market Crashing? 5 Signs to Consider

    Learn about some signs of a potential stock market crash including a high level of margin debt, lots of IPOs, M&A activity and technical factors.
  5. Investing

    How An IPO Is Valued

    The initial valuation of an IPO can determine the success or failure of a specific stock - but how is that price determined?
  6. Insights

    Why Are Companies Taking Longer To Go Public?

    Learn why private companies are waiting longer to have their IPOs. Understand why it may be more advantageous for a company to stay private.
  7. Insurance

    4 Hottest IPOs in 2015

    Where is smart money headed this year? These are the most anticipated IPOs of 2015.
  8. Investing

    Dotcom vs. Today: 3 Reasons Why U.S. Equities Are More Dangerous

    Explore the factors that make the end of the current bull market more dangerous than the dotcom bubble, and why investors may have no place to hide this time.
  9. Investing

    How To Track Upcoming IPOs

    Interested in investing through IPOs? Here is the list of free sources for information on upcoming IPOs.
  10. Investing

    The One ETF To Own The Top Internet Company Stocks

    Grab a pie of booming online businesses in one shot! Here is the one ETF that lets you own stock in the top Internet companies.
Trading Center