I think it's mostly the general consensus--period. This has boiler-room style "pump and dump" written all over it; yet the big investment banks have been getting away with running IPOs this way for years.
Do you think that us living in this time period would help mitigate that?
I mean back in 2000 I was too young to understand all that, but was the bubble partly due to misinformation by of the public? I feel like with all these stories about the IPO being cast in a negative light, and how connected we are now w/ information, the average person would be much more careful.
I remember the dot-coms. I wouldn't say I was all that savvy then (or now), but my take is it feels very similar now.
It really didn't seem like there was a lot of out-right deception then, or even misinformation. Companies will always say they're great. There's enough information out there to inspire some skepticism if you're open to it.
I'm no professional at this, but my uneducated observation is that, then and now, there's a lot of money to be made, and people are willing to risk riding the wave as long as they think they can get out before the crash. It's just simple greed. Nobody really believes these companies are actually worth what they're being pitched at; but "if I can quickly double or quadruple my investment, then get out clean, why should I miss out? After all, I'm smarter than everyone else..."
You've described the very definition of the "greater fool theory" [1]. This is investing based on momentum rather than value (such as the price to earnings ratio). The intent is to sell to another "fool" after mading a profit. Of course it all comes tumbling down when the market runs out of fools [2].
Not really misinformation, just a suspension of judgement.
Forget 2000, what about the real estate bubble? That didn't happen that long ago, yet nobody remembered 2000, and nobody remembers the last couple of years.
The main difference now is that the average person is not really gung-ho into the stock market, or hasn't been for the last few years, particularly with regard to buying/selling individual stocks.
Most of this stuff today seems to be 401k and IRA fund managers being fleeced by this and HFT.
PS
Keep in mind, most of the 'investors' who didn't get too badly burned off of the dot com stuff after 2000, moved their money into real estate since the NASDAQ was comparatively 'in the shitter'.
Check out these great dotcom documentaries (both show meteoric rise and epic failure):
I think the key with both was that there was a "plausible" explanation for why the bubble valuations made sense.
In the 2000s, you had the "New Economy" bullshit: The internet was changing everything and the most important thing was to start a company that carved out your niche of the New Everything. Profits or even cashflow fundamentals could wait until after the land-grab.
There was a kernel of truth of course, the Internet has changed a great deal. That's what made the argument sound plausible.
With the housing bubble, the argument was "real-estate never goes down," "the population keeps getting larger so demand always goes up." "houses are real things with real value."
Again there's a kernel of truth to the argument --- just enough to hide the reality of the bubble from people who don't take a hard look at the numbers with a critical eye.
And moreover, during 2000 as well as the housing bubble, very many people who participated believed there was a bubble. Goldman Sachs were long on housing derivatives for years before they went short in the final few months.
There's a lot of money to be made running with the herd in a bubble so long as you veer off before the herd goes off the cliff.
Pre 2000 there was less negative information. Little or no blogger type analysis of anything almost all information came from traditional news sources who ate up positive information. I know because I was able to manipulate them for publicity.
So there is more info now. But the only way that information out there helps is if it makes it to the traditional media which broadcasts it to the regular non-tech site reading public. And that appears to be happening actually.
Actually they can, and yes they are bleeding cash and yes they are 'upside down' in the parlance, but if they lower the offering price and still can't get it fully subscribed they are stuck. They can go back to their investors for a bridge loan, or issue warrants, or try another private (probably down) round.
Two very interesting things have come out of Groupon's history so far, the first is that they turned down a $6B buyout (which seemed amazing to me at the time) and then they did a fund raise where most of the stock was insiders selling.
That particular combination makes me wonder if the buyout was rejected because the way money would have been shared around was stipulated by previous term agreements, and some of the investors didn't want that, so they did the series D or what ever it was which allowed them to funnel money to specific investors, so that now if they take a hair cut on valuation those investors are 'protected.'
So the fact that they are bleeding cash will force some sort of financial transaction to occur (buyout, bridge loan, chapter 11 bankruptcy), if they are having a hard time getting the offering fully subscribed they may be shopping the company around, and if they are doing that they are in a much weaker position than they were before.
Groupon just happens to be the latest example.