Wednesday, July 10, 2013

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

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

Morgan Stanley was just one of many investment banks trying to capitalize on the growth of the World Wide Web. Most of the ventures that they marketed were “concept” stocks—companies that seemed to encapsulate a big idea. In February 1996, Hambrecht & Quist and Robertson, Stephens issued 2 million shares in a Silicon Valley company called CyberCash at $17 each. Within a week the shares were trading at more than $50. William Melton, the man behind CyberCash, had already made a fortune by cornering the market in the electronic terminals that stores use to verify credit card numbers. In August 1994, Melton came out of retirement and founded CyberCash, which developed software to protect the security of online credit card transactions. With its catchy name, CyberCash had no shortage of media attention, but it did have a shortage of customers. In the seventeen months between its incorporation and its decision to go public, the firm’s total revenues were zero—though it did manage to accumulate losses of more than $10 million. This record presented something of a challenge to stick-in-the-mud stock analysts that liked to go by the numbers. After Standard & Poor’s refused to recommend CyberCash’s stock, Mark Basham, an analyst at the ratings agency, explained apologetically: “The lack of any sales was a major negative in our rating.”

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