the last book I ever read (dot.con: How America Lost Its Mind and Money in the Internet Era, excerpt thirteen)

from John Cassidy's dot.con: How America Lost Its Mind and Money in the Internet Era:

With the help of a research firm, Pegasus Research International, Willoughby had examined the financial statements of more than two hundred Internet companies. For each firm, he calculated the rate at which it was spending money, the “burn rate,” and compared this to the cash and marketable securities on its balance sheet. His conclusion: within twelve months at least fifty Internet firms would have no money left. Among the companies facing immediate problems were CDNOW, whose takeover by Time Warner and Sony had recently fallen through; Peapod, the online grocery; and drkoop.com, the medical Web site set up by Dr. C. Everett Koop, a former U.S. surgeon general. The situation facing many other firms was only slightly less dire. MotherNature.com would run out of money in four and a half months; Drugstore.com and PlanetRx.com had enough cash to last nine months; eToys would be out of money in eleven months.

The Barron’s piece was the most damaging piece of journalism that the Internet boom had produced, but most devastating of all was its timing. Investors had been tacitly assuming that Internet companies, whatever their losses, would always be able to raise more cash by issuing more stock. For a long time, this had been a reasonable assumption, but given the setbacks already suffered by a number of Internet stocks it no longer was. Investors were increasingly wary of putting more money into collapsed Internet stocks. The Barron’s article pointed out what would happen if the cash spigot got turned off permanently, and Internet companies were left to fend for themselves.