Beware the herd: lessons from the dotcom bubble still ring true

Business

Beware the herd: lessons from the dotcom bubble still ring true

The forces that caused chaos 20 years ago are still present, and investors should take heed, say experts

James Titcomb, Olivia Rudgard, Laurence Dodds and Sam Benstead

After months of surging share prices, on Friday March 10 2000, the Nasdaq composite closed at 5,048.62. The tech-heavy index had risen 24% in the first 10 weeks of the new millennium, notching 16 record highs in the process. Investors were giddy at the prospects for the “new economy”, distinct from the stale industrials of the previous era (the Dow Jones had peaked 10 months earlier).

The Tuesday after the Nasdaq hit its record, the UK got its dose of dotcom fever. Shares in Lastminute.com, the first major British internet company, leapt from 380p to 511p in its first hour of trading, valuing a company with quarterly sales of just £409,000 at £768m.

But by the end of Lastminute’s first day of trading, shares had fallen below their offering price, turning celebration into alarm, recalls Pete Flint, a founding employee at the company...

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