Why have Shares in Internet & Technology companies been so volatile in the last few years?

Why have Shares in Internet & Technology companies been so volatile in the last few years?




Introduction




In 1999/2000, there was a belief that ‘dotcoms’ were going to change business methods and replace the ‘old economy’. People thought that Internet based companies could eliminate the cost of real estate and sales staff, reducing average total costs therefore being able to undercut the costs of traditional competitors and make higher profit margins. It was relatively easy for small companies to get funding from venture capitalists and by placing shares on OFEX or AIM. Investors believed the hype and shares boomed.

In March 2000 technology shares slumped . Since then dotcoms and technology stocks have been in the doldrums, Venture capitalists have become more conservative and the Initial Public Offering (IPO) market has snapped shut since internet companies would not be able to raise much capital in the new market. Advertising revenues have collapsed, confid...