Is Internet Industry Facing an IPO Bubble 2.0?

25 Pages Posted: 4 Dec 2014 Last revised: 17 Jul 2015

See all articles by Miguel Sousa

Miguel Sousa

School of Economics and Management, University of Porto

Marta Pinho

School of Economics and Management, University of Porto

Date Written: December 3, 2014

Abstract

During the so called dot-com bubble period in the late 1990s, the question of whether the Internet stock prices could be explained or not by companies’ fundamentals was intensely discussed and studied. Ten years later, the high valuations of recent Internet IPOs, justified mostly on the basis of a growing number of Internet users and less on the basis of the companies’ fundamentals, led many to wonder if the Internet industry is facing a valuation bubble 2.0. This study explores the impact of the major (financial and non-financial) value-drivers, identified during the previous dot-com bubble, on the recent Internet companies’ IPO stock price and whether that impact differs from the one observed in the previous dot-com wave. Additionally, by analyzing more than one non-financial measure at the same time we are able to identify the relative incremental explanatory power on the IPO stock price of those non-financial measures.

Keywords: IPO, Internet, Valuation, Media hype, Web traffic

JEL Classification: G12, G14, G32

Suggested Citation

Sousa, Miguel and Pinho, Marta, Is Internet Industry Facing an IPO Bubble 2.0? (December 3, 2014). Available at SSRN: https://ssrn.com/abstract=2533383 or http://dx.doi.org/10.2139/ssrn.2533383

Miguel Sousa (Contact Author)

School of Economics and Management, University of Porto ( email )

Rua Roberto Frias
s/n
Porto, 4200-464
Portugal

Marta Pinho

School of Economics and Management, University of Porto ( email )

Rua Roberto Frias
Porto, 4200-464
Portugal

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