Monday, June 3, 2013

the last book I ever read (The Prince of Silicon Valley by Randall Smith, excerpt three)

from The Prince of Silicon Valley: Frank Quattrone and the Dot-Com Bubble by Randall Smith:

The best measure of speculative froth that animated the stock market during the bubble was the NASDAQ composite index. It rose from 1,771 at the end of October 1998 to 2,686 by June 1999. But its most explosive gains came in the second half of 1999, when it rose 51 percent, to 4,069. The speculative top came quickly after that. The NASDAQ composite peaked at 5,049 on March 10.

On March 9, just at the NASDAQ peak, the IPO of Selectica, an Internet selling-systems software company based in San Jose, was priced at $30 a share. Demand was white-hot. Selectica became CSFB’s second biggest first-day gainer, rising 371 percent in price to a close of $141.23. Fidelity Investments, the Boston mutual-fund gorilla, got 150,000 shares. Munder Capital Management, home of an $11 billion Internet mutual fund that would fall 87 percent in price by 2002, received 25,000. Larry Bowman’s fund got 20,000.

Several Lustig traders received Selectica shares, too. Energia Global Group, run by Andy Siegal, received 5,500, as did Ascent Capital, run by Steve Kris. In all—without naming names—the SEC would later claim customers willing to share their profits with CSFB, in the form of outsize commissions, received 324,903 shares out of 3.9 million CSFB allocated.

The following Saturday, in an issue dated March 20, 2000, Jack Willoughby of Barron’s wrote a sobering and prophetic cover story entitled, “Burning Up: Warning: Internet Companies Are Running Out of Cash—Fast.” He noted that without additional financing, 51 out of 207 Internet companies included in a research study would run out of cash within twelve months. One of the first he mentioned was Intraware.

The following Monday, March 15, 2000, the NASDAQ began falling. In the first three days of that week, it fell 10.2 percent, to 4,583, and the 5,000 level eventually became a distant, fleeting memory.

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