19 Things That Actually Happened in 1999: Yahoo! was worth more than Berkshire Hathaway. Today Berkshire is worth approximately $360 billion, or about $320 billion more than Yahoo!
May 27, 2015 Leave a comment
19 Things That Actually Happened in 1999
The happenings on Wall Street in 1999 prove that sometimes truth is stranger than fiction. Although the events of 1999 are ancient history by many standards, some very clear memories no doubt remain for many investors. With technology and biotech stocks once again hot, a number of comparisons to the last bubble have been made. But the current environment can’t come close to matching 1999, either in terms of valuations or in the sheer madness of the markets. Below are 19 events that actually happened in 1999, highlighting the irrational exuberance that swept over investors (well, most investors).
- Yahoo! was worth more than Berkshire Hathaway.
High-flying Yahoo! had a market cap of nearly $100 billion in 1999, putting it ahead of Warren Buffett’s Berkshire Hathaway. Barron’s even ran a cover story on the Oracle of Omaha titled “What’s Wrong, Warren?” that questioned whether the end was near for Buffett:
To be blunt, Buffett, who turns 70 in 2000, is viewed by an increasing number of investors as too conservative, even passe. Barron’s noted that it wasn’t the only voice questioning Buffett; critics from a new corner of the world were becoming increasingly vocal:
Indeed, Buffett has even started taking flak on Internet message boards. One contributor called Berkshire a “middlebrow insurance company studded with a bizarre melange of assets, including candy stores, hamburger stands, jewelry shops, a shoemaker and a third-rate encyclopedia company.”
Today Berkshire is worth approximately $360 billion, or about $320 billion more than Yahoo!
- Whoopi Goldberg promoted Flooz.
Flooz launched in 1999 as a currency designed to be used by Internet merchants. Users could either purchase Flooz directly or accumulate credits from online retailers as a loyalty bonus. The product proved to be tremendously popular — with a Russian mafia syndicate that used it as a key part of a stolen credit card ring.
When the company shut down in August 2001, all unused Flooz became nonrefundable.
A similar company, Beenz.com, raised nearly $100 million from a group of investors that included Larry Ellison.
- There were 477 IPOs.
For the four-year period ending in December 1999, a total of 1,908 companies went public in the U.S. Just a few years later, the number of IPOs dropped by nearly 90 percent.
A whopping 78 percent of public offerings in 1999 were in the technology sector and 76 percent of them had negative earnings.
- IPOs generated $66 billions in proceeds…
…but left another $37 billion on the table after accounting for the first-day pop.
- Webvan raised $375 million.
The grocery delivery company sold 25 million shares at $15 each, giving it a valuation of about $4.8 billion. That indicated a price-to-sales multiple of about 6,000x. The company’s IPO prospectus cited several risks in putting its new capital to work:
A complex and unproven business system;
Lack of sufficient customers, orders, net sales, or cash flow; and
Lack of widespread acceptance of the Internet as a means of purchasing groceries and other consumer products.
- E-Stamp.com and OurBeginning.com bought Super Bowl ads.
So did more than a dozen other dot-com companies, including Pets.com and LastMinuteTravel.com. The 30-second spots cost approximately $2.2 million for the January 2000 Super Bowl — meaning that the following spots cost more than $40 million in total.
The following year, E*TRADE ran a spot poking fun at the glut of tech companies from the 2000 broadcast:
- DrKoop.com went public.
Today’s younger generation may not be familiar with C. Everett Koop, surgeon general of the U.S. from 1982 to 1989. Koop remained relevant after leaving that position in part because of his endorsement of Life Alert bracelets.
In 1997, DrKoop.com launched as one of the first websites publishing health-related content. In 1999, thecompany raised $89 million in an IPO, after which the stock quickly rose from $9 to $45.75.
The company was criticized for taking money in exchange for highlighting the services it recommended — a practice that would have likely prompted a major scandal today — and struggled to build meaningful revenue.
The company of course went bankrupt, and today the domain is defunct.
- Marc Andreessen was endorsing Miller Lite.
Before he became known as one of the world’s leading venture capitalists, Andreessen was the co-founder of Netscape. The rock star status afforded to dot-com CEOs was enough to land him in a Miller Lite commercial alongside Norm MacDonald. (Spoiler alert: Andreessen likes Miller Lite because it’s smooth, MacDonald because it tastes great.)
- Tech analysts went completely insane.
The euphoria over billion-dollar IPOs and a seemingly endless stream of money spawned a number of seemingly brilliant tech analysts. In hindsight, however, the “insights” being offered up hold only entertainment value.
From the Los Angeles Times:
“This Linux craze is all about an emotional assault on Microsoft–until now there has been no way to play David to their Goliath,” said Gail Bronson, a Silicon Valley start-up strategist and senior analyst for IPO Monitor, a Calabasas-based data service. “There is an adrenaline rush the Linux crowd is getting from this, but I think we can go overboard here on dissing Mr. Softie,” she added, referring to Microsoft.
- VA Linux gained 698% on its IPO.
Maybe the quote above wasn’t all that crazy. One of the most successful IPOs of the year was VA Linux, a manufacturer of personal computers with the Linux operating system installed. When the company offered shares to the public in December 1999 at a price of $30 a share, the price immediately jumped to more than $300 before ending the first trading day at $239.25.
After a handful of name changes and mergers, the company now exists as Geeknet (GKNT) — with a market cap of about $114 million, which (it should be noted) doubled just yesterday (May 26, 2015) when it was announced that Geeknet would be acquired by Hot Topic. That’s right: the hottest IPO of 1999 was acquired by Hot Topic 16 years later.
- Microsoft was worth $606 billion…
…with $19 billion in annual sales. Today, MSFT has a market cap of about $385 billion (with a much more respectable $87 billion in revenue). Several other high-flying tech stocks are still far below 1999 levels.
- MapQuest went public.
After being spun off from R.R. Donnelly & Sons in 1994, MapQuest became a hit online in the mid ’90s. In 1998 the company generated almost $25 million in revenue, and decided to go public in 1999. A note at the time provided some insights into the company’s revenue profile and opportunities.
While most of MapQuest.com’s revenues still come from digital mapping (68% in 1998), the company is increasing revenues through Internet business products and services. Using MapQuest.com server software, other Web sites can post directions to corporate offices for customers bold enough to get offline and into the real world.
- The Pets.com sock puppet appeared on “Good Morning America.”
Pets.com has become a punchline, representing the most memorable collapses of the dot-com bubble. The country was so caught up in the world of high-flying tech stocks that the company’s mascot, a sock puppet who for some reason carried a microphone, appeared on “Good Morning America” and “Live With Regis and Kathie Lee.” The puppet also appeared in the Macy’s Thanksgiving Day Parade, and starred in a Super Bowl commercial.
- Yahoo! purchased Broadcast.com for $5.7 billion.
Mark Cuban became a billionaire in 1999 when the Internet radio company was acquired by Yahoo! for about $10,000 per user.
Today, Broadcast.com redirects to the Yahoo! homepage.
- Yahoo! purchased GeoCities for $3.6 billion.
The Yahoo! shopping spree didn’t stop with Broadcast.com; the company also snapped up GeoCities, which was the third-most visited site in the world at the time.
Yahoo! closed GeoCities in the US in 2006, though the service is still available in Japan.
- Mail.com and Phone.com went public.
So too did MP3.com (MPPP), Garden.com (GDEN), and China.com (CHINA).
Alanis Morissette was one of the early investors in MP3.com, pumping more than $217,000 of her own money into the company that was sponsoring her tour at the time. When the stock hit $105 during its first day of trading, Morissette’s 329,328 shares were worth nearly $35 million.
Although MP3.com ultimately failed, Alanis didn’t walk away empty handed; according to SEC filings, shepocketed at least $2 million from sales of the shares during 2000.
- FreeInternet.com launched.
To compete with NetZero, FreeInternet.com launched as a free Internet service provider (ISP) in 1999. The company lost $19 million that year, but by mid-2000 had 3.2 million registered users and was the fifth-largest ISP in the country.
The company was perhaps best known for its television spokesman Baby Bob, described at the time as “a precocious, talking baby with an adult intellect and sense of humor who tells everyone about the simplicity of the service.”
Incredibly, FreeInternet.com signed a deal with CBS to create a primetime pilot starring Baby Bob.
- KISS played iBASH ’99.
Shortly after securing $20 million in financing, Web video distribution company Pixelon spent $16 million to host a lavish launch party at the MGM Grand in Las Vegas. The event, called iBASH ’99, featured musical performances by the Dixie Chicks, KISS, and Tony Bennett.
The event was supposed to be broadcast over the Internet, but the company’s technology failed to deliver and only those in attendance witnessed the spectacle. The iBASH ’99 event was just one chapter in the company’s bizarre history.
- Warren Buffett bought Jordan’s Furniture.
At least one investor steered well clear of Silicon Valley in 1999; the acquisitions made by the Oracle of Omaha certainly lacked the spectacle of the year’s largest deals. Buffett’s big splurge in 1999 was a New England furniture company that opened for business just as World War I was winding down.
Today, Jordan’s is still selling furniture. The company frequently runs promotions tied in to the performance of the Boston Red Sox and Bruins, and features unique family entertainment such as a ropes course and IMAX theater within its stores.
In his 1999 letter to shareholders, Buffett explained why his strategy differed from many in the market at the time:
[…] We don’t own stocks of tech companies, even though we share the general view that our society will be transformed by their products and services. Our problem — which we can’t solve by studying up — is that we have no insights into which participants in the tech field possess a truly durable competitive advantage.
2015 vs. 1999
We are likely not in another bubble a la 1999; while profitability may remain elusive, many of today’s tech darlings own valuable technology and products — and not just a premier domain name. Still, some of the hot tech stocks in the headlines today will likely be distant memories a decade from now. Others may make a leap forward that is equivalent to Amazon’s evolution from online book retailer to drone delivery service and Golden Globe winner. The investors able to differentiate the next Amazon and the next Garden.com will clean up. Those who get it wrong won’t.
If you can’t discern between the two, you’re not alone, and you’re not in trouble. There’s no requirement to forsake dividend stocks and load up on the latest Nasdaq darlings. Just as they were in the late 1990s — and for decades before that — dividend stocks remain the surest way to accumulate wealth over the long term. Candy stores, hamburger stands, jewelry shops, and shoemakers can still make good, boring investments (though you may be wise to steer clear of encyclopedia companies).
About the Author: Michael Johnston
Michael Johnston is the Senior Analyst for Dividend Reference, and also serves as the COO of parent company Poseidon Financial. His investment expertise has been featured in The Wall Street Journal, Barron’s, and USA Today, among other publications. He resides in Chicago.