Technology exchange traded funds (ETFs) are trading higher as market optimism over up-and-coming social networking sites help lift valuations, but some observers think the hyped-up values are becoming a cause for concern.
Evelyn M. Rusli and Verne G. Kopytoff for The New York Times note that investments in Facebook and Zynga have more than quintupled their implied worth for each company over the last two years. Social shopping site Groupon may launch an initial public offering valued at $25 billion when the company was previously valued at $1.4 billion just last year. [Cloud Computing: Will It Provoke Industry And ETFs?]
Thomas Weisel, founder of an investment bank called the Thomas Weisel Partners Group, is worried that “the pools of capital that are looking at these Internet companies are far greater today than what you had in 2000.” [ETF Options to Gain Indirect Exposure to Facebook.]
However, the only difference between now and 1999 is that there were only 20 tech IPOs launched in 2010 as compared to 308 in 1999. More importantly, today’s tech start-ups have real businesses backed by real revenue streams.