ipo madness 18 april, 2000 by johnmichael patrick monty monteith

A couple weeks ago I went to the IPO party for Loudeye.com, a new streaming media Internet based company. Their stock just went public, and on a ruckus Thursday evening in the Westlake district of downtown Seattle, they had themselves a little party. This was a party like none other. Well, that is if you ignore the rest of the dot com IPO parties happening on seemingly every block of the Seattle metropolitan area.

Still, Loudeye's little get together was worthy of Las Vegas. Complete with Japanese pornos on multiple big screens, transvestites walking the grounds for color, and a man wearing only a loin cloth with his skin painted in gold. (By the end of the evening most of the gold has been rubbed off by admirers.) And the theme? Money, of course. Goldfinger being shown on television laced with pornography, goldfish on the table, and gold lekos displaying IPO and dollar symbols on the walls. This was a party with a single purpose: bump the stock price. And, for the most part, it worked.

One can not help but notice that the Internet's first and foremost goal is not to transform our lives. Not to make our lives simpler and more engaging. Not to show us new technology, or to help us learn about the world. The goal of the Internet is get rich quick. It seems like one can walk the suburbs of Seattle and every other house has an IPO millionaire inside. Neighbors that hop from IPO to IPO to make as many bucks as possible on unrealistic promises of ecommerce and networked technology, without having to actually do any work or have any original ideas.

What is most striking about these dot com wonderdoms is the utter lack of intellect and vision. These are Gates-wanna-be's that are jumping on the bandwagon to make as much money as possible. Sure, they talk the talk. They can do a pretty good show blabbering about flash animation, streaming media, IP gateways, redundant servers, VPN remote access, and the rest of the catch words of the day. They sour the air as they chomp on their dot com cigars about their making-money-quick-wet-dreams, present it in a tight package, buy a hip sounding dot com name, and go public. They walk home millionaires, and investors are left holding a small percentage of an idea worth less than the Budweiser and cheap cigar that helped to inspire it. Lets face it, most of these dot com overnight wonders make pyramid marketing schemes look good. Given a choice between seeing Amway or overnight Internet companies bite the big one, I am leaning toward the high tech end.

We all know that nearly every dot com company is over valued. We know that it is unrealistic to believe that even 10% of them will be around two years from now. But what is totally amazing to me is the number and type of people buying into this. People that would otherwise scoff at people that steal credit card numbers are somehow perfectly content going from IPO to IPO making millions off of investors that are merely trying to get a piece of the Internet millions. They ignore the fact that all of this money is coming from someone - being stolen from someone. Investors that watch the tele and see that the Internet is the big thing everyone is talking about, and they buy stock on ihatedonutholes.com and expect that they are investing in a company that will be the next Microsoft. Wake up! You are pretty much guaranteed that if any of these companies are the next Microsoft, it could only happen through monopolistic power like Bill's empire. And how many of these dot com's are going to be the next big rich monopoly? One? Maybe. That means nearly all of the dot com investors out there are being robbed.

The investors will ultimately suffer. Not the smart investors that have already cashed in their chips, but the ones that are sticking in the market or are just now getting involved. They are blind to the fact that the vast majority of these dot com companies are merely smoke and mirrors. They are there to make millions for senior management, and at some point in the near future they will all bail with their millions at hand. These investors have not the slightest idea that the ONLY companies making money on the Internet are those selling pornography. Nearly every non-porn company on the Net has never made a profit, many have never earned a cent. Their sole way of making money is from investors giving their money away when the company goes public.

How long will the madness last? Everyone knows that it will come to an end, but when is a little unclear. Many have been predicting for some time, including myself, that the beginning of he end would start a few months after January 2000. Not surprisingly, as of this writing, all of the gains for the year on the NASDAQ have disappeared, and lately the blue chip stocks have come back strong. However, it is not clear if this is the beginning of some common sense, and how much of it is due solely to the troubles in Redmond with the Justice Department.

And, on an interesting side note, it is very peculiar how this current plunge was started entirely by the court issues with Microsoft. Suddenly Bill Gates loses a few dollars per share, and the entire high tech industry goes with him. You can bet that nearly every high tech company has a new-found love for Microsoft, or at the very least, they are going to keep their complaints hidden until they can cash in first.

Others following the ups and downs of high tech stocks have predicted that, much like other cycles, the Internet boom will last for five years. If you are keeping track, we are currently two years into the cycle. However, I cannot imagine that the market can continue to support thousands of companies showing no profit for three more years. At some point these companies are going to either have to show promise, or show the money.

The point is that no one knows when it will end. But it will. You can bank on it.

Like many of these Internet wonders, Loudeye is a company that seems to show promise. Ignoring their shenanigans on raising stock price with Japanese porn, they do seem to be a solid company that could possibly be in that ten percent of Internet companies that might live beyond the fallout. This will largely depend on senior management of the company, and whether they are there to build a company that will stand the test of time, or whether Loudeye was built solely to make a handful of people rich overnight. Unfortunately, if the rest of the dot com's out there are any sign, the latter is the likely answer. But time will tell. However, you will not see me investing my money in Loudeye or any dot com like it.