Belfast Telegraph

Thursday 18 December 2014

Does AO mark start of a new dotcom bubble?

The huge valuation given to AO is starkly reminiscent of the dotcom boom of the late 1990s.

AO, an online electrical retailer, is now within touching distance of Dixons' market capitalisation. This is despite the fact that AO only enjoys a small fraction of Dixons' turnover.

Although AO is a much sounder proposition than the now infamous Boo.com, the collapse of which signalled at least the bursting of the dotcom bubble this side of the Atlantic, I am becoming increasingly worried by the market's valuation of all things online.

Of course online should spearhead a company's strategy, as ASOS shows us, but when you look at share prices racing away from a company's numbers it is a little worrying.

Fortunately, in one crucial way it doesn't feel like 1999 all over again and that is because small investors are relatively absent from all this.

Back in 1999 technology funds were receiving such an enormous inflow of cash from private investors wanting to make their fortune from dotcom firms that managers could barely find things to do with all the cash. One company had so many ISA applications that it hired a helicopter to carry them from Canary Wharf to their head office.

The technology fund manager I spoke to this month said we are still a long way from that. But perhaps when that starts to happen is the time to head for the market exit?

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