The formerly high-flying Internet stocks are sinking fast.
As Wall Street professionals let their disdain for the ridiculously high valuations of most Internet stocks more public, individual investors who’ve been buying the sector are turning into net sellers.
Just yesterday, top Wall Street insiders rocked the Internet world with their negative comments.
“Recent favorites such as the Internet stocks appear to be under pressure and are expected lower. We recommend taking money out of these stocks,” said Ralph Acampora, the outspoken chief technical strategist for Prudential Securities.
“I promise you that like all bubbles, this bubble will come to an end,” said Barton Biggs, the bearish strategist for Morgan Stanley Dean Witter.
Uber investor George Soros also derided the speculative bubble, while not limiting his comments to the Internet sector, but to all stocks.
“I think one can detect the formation of an asset bubble, similar to one Japan had in the late 1980s,” said the billionaire investor.
Some of the best-known Internet stocks have already lost at least 30 percent of their value. Besides hurting shareholders, that loss of valuation is hurting the fortunes of the young, brash founders of these companies.
Take, for example, Pierre Omidyar, the founder and chairman of online auction site eBay. Omidyar holds about 15.3 million shares of eBay stock, or about 38 percent of the company. His stake was worth $2.8 billion after yesterday’s 32-point drop to close at 1813/4. That’s significantly down from the $4.9 billion Omidyar was worth just two weeks ago.
Still, Omidyar may choose to exercise an option to sell his shares today; it is the first time since eBay’s initial public offering last September that insiders can sell. Based on the IPO price of $18, Omidyar has a gain of 909 percent.
Amazon.com’s Jeff Bezos is in similar straits, though there is no limit on when he can buy or sell shares. Bezos and his family own 48 percent of the online book retailer, which was valued at yesterday’s close at $16.78 billion. That means Bezos’ stake is worth $8.05 billion, down 46 percent from its value on Jan. 8 when Amazon stock hit a 52-week high of 1991/8. Yesterday, the stock fell 7 to 106.
MindSpring Enterprises fell 23/8 to 925/8 yesterday in anticipation of its earnings, which are expected to be released today.
Since Jan. 11, the Internet access provider has lost 26 percent of its value. Its co-founder and honorary chairman, a three-legged Rottweiler named Henri, needn’t worry; his non-human status prevents him from owning any of the company’s stock. But Henri’s master, MindSpring co-founder and CEO Charles Brewer, can’t be happy. His 11-percent stake is now worth only $285 million, down from $385 million just 10 days ago.
Broadcast.com’s co-founders, Mark Cuban and Todd Wagner, are facing a similar loss of wealth – on paper, at least.
Cuban, chairman of the company, even lost his billionaire status.
The Internet provider of sports, news, music and information has dumped 63 percent of its value in just eight days of hugely volatile trading.
For Cuban, who owns 28 percent of the company, that means his stake is worth only $482 million instead of $1.2 billion.
And Wagner’s shares, comprising 16 percent of the company, are now worth only $296 million, down from $792 million on Jan. 12.