In the eye of the current storm are two companies that have only just come to market – Just Eat and AO World, both of which have seen their share prices fall below their float prices. I'd groaned when I heard of their plans to float – because their business models are hardly uncopiable and frankly ludicrous valuations were being attributed to them.
Post debut Just Eat was worth close to £1.5bn – which I won't be the first to point out meant it was worth more than Domino's Pizza, an established, usually fast growing, dividend paying takeaway operator with several hundred franchised outlets in the UK. I similarly baulked at AO's valuation – before last week's crash it was worth roughly the same as Britain's biggest electrical retailer by market share, Dixons Retail. Apologists for the two firm's valuations say that they are justified because both will bring disruption to their markets. Ocado – whose shares have fallen by a third in the last month – has been making similar claims for some time now, yet it still holds just 1 per cent of the UK grocery market and most shoppers still prefer to visit the supermarket or convenience store.
The whole thing is rather reminiscent of the mad days in which I joined the rapidly deflating stock market party, prior to which adding the suffix dot com guaranteed a hefty valuation and runaway IPO. Of course, much has changed in the 14 years since that bubble burst, such that the claim that "this time it's different" cannot be dismissed out of hand.
In 2000 internet connections were slow and tethered to PCs; now they are fast and in your pocket wherever you may be. The internet can still very much disrupt the status quo, simply because it has become considerably more ubiquitous. But that technology is there for all to use – all businesses these days utilise it to an extent, some in ways that can indeed disrupt mature markets. I would much rather invest in established businesses that use technology well, or indeed those bona fide technology companies that provide the picks and shovels (you'll find plenty of these in our Aim 100 review which kicks off this week).
So, I'm not treating recent falls for these new dot com style businesses as a buying opportunity. And I am concerned at the speed at which the rout unfolded – it implies that few are really convinced that such stocks can justify their froth. And that froth also suggests that discipline may have gone missing elsewhere on the market, too.
