Good morning. It's Thursday, March 5, and welcome to this week's Business & Finance newsletter. This week, in light of all the recent news about a potential AI bubble, we're covering something we keep seeing it compared to: the Dot-Com Bubble of the early 2000s. We're also looking into the Coca-Cola Co. and IPOs.
As always, thank you for being a reader!
—Phoebe Bain, 1440 Business & Finance Section Editor
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The dot-com bubble, explained
The dot-com bubble refers to an internet company stock market bubble that began around 1995 and burst in 2000. Over those five years, the Nasdaq climbed from 1,000 to more than 5,000 points—reaching its peak in March 2000.
In the early to mid-1990s, as the internet was becoming a larger part of everyday life, the buzziest startups of the era were "dot-com companies"—companies that relied on the internet (and its most common domain) to do business, like Amazon. Investors and venture capitalists couldn't get enough: At the height of the bubble, venture capital deals totaled more than $25B per quarter. Despite the influx of capital, many dot-com companies weren't generating enough revenue, often operating at net losses between $10M and $30M a quarter.
Several major tech companies, including Dell, Cisco, and Microsoft, began selling off technology stocks. Investors were spooked and began withdrawing their money. Between March 2000 and October 2002, the Nasdaq dropped 76% to 1,139.90.
Many dot-com-era companies, like Pets.com, shut down, but some are still around—like Amazon, PayPal, and Google. These companies are largely credited with surviving the dot-com bubble because of their focus on long-term, scalable growth.
Explore everything else we've found on the Dot-Com Bubble.
Also, check out ...
> How the dot-com boom made Mark Cuban a billionaire. (Read)
> Watch a medley of Pets.com commercials with the famous sock puppet mascot. (Watch)
> See which companies folded and which survived the dot-com crash. (Read)
> More than 650 companies went public in the US in 1996. (Read) |
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Coca-Cola 101
Named after "coca" leaves and caffeine-rich "kola" nuts, Coca-Cola has been America's bestselling soft drink for decades. Every day, more than 1.9 billion servings of the roughly $300B Coca-Cola Co.'s drinks are sold worldwide.
In 1886, wounded Civil War veteran and pharmacist John Pemberton formulated the initial Coca-Cola syrup as a tonic meant to relieve headaches. But it was Asa Candler who is credited with professionalizing the organization, founding the Coca-Cola Co. in 1892 in Atlanta after consolidating rights to the company as Pemberton's health declined.
The beverage contained cocaine until the early 1900s, when the company removed it from the formula and dropped its medicinal claims. In 1899, Candler, who thought bottling was a fad, sold the exclusive rights to bottle Coca-Cola to two Chattanooga lawyers for just $1.
As a result, most Coca-Cola bottling is still handled by independent franchise bottlers. Today, this asset-light business structure is part of the reason Coca-Cola consistently ranks among the top 100 companies in the US by annual revenue.
Explore everything else we've found on Coca-Cola.
Also, check out ...
> The drink that evolved into Coca-Cola was originally called "Pemberton's French Wine Coca." (Listen)
> Coca-Cola claims that only two people in the world know the full Coca-Cola formula. (Read)
> See how Coca-Cola bottle designs have changed over the years. (View)
> The Coca-Cola bottle was designed to be recognizable even when shattered. (Read) |
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How initial public offerings work
An initial public offering is the process of a private company becoming public. In an IPO, a company puts shares of the company on the stock market for the public to purchase.
IPOs often have all the pomp and circumstance of a graduation ceremony, as they are one of the biggest milestones a company can achieve. From Apple in 1980 to Reddit in 2024, every public company has gone through an IPO at some point.
To begin the process, a company hires investment bankers (who earn roughly 7% of the IPO’s gross proceeds) to help set the organization’s target valuation range—an estimate of how much the company is worth—and schedule an IPO date. From there, the bankers market the IPO to hedge funds and other large potential investors.
Transitioning from a private to a public company allows an organization to more easily raise a significant amount of capital. This helps the company expand.
Explore everything else we've found on IPOs.
Also, check out ...
> The number of publicly traded companies has decreased in recent years—here's why. (Watch)
> Inside some of the craziest IPO days ever. (Read)
> The 25 biggest IPOs in US history. (Read)
> What is a SPAC? (Watch) |
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One Story We're Taking Stock In |
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Last week, Block CEO Jack Dorsey announced that the organization—which owns companies including Cash App, Square, Afterpay, and more—was laying off 4,000 employees, roughly 40% of its workforce. The reason? AI.
The layoffs arrived during a perfect storm of declining tech stocks (DoorDash, Salesforce, and more are grappling with AI disruption) and viral essays about AI's potential to shrink the white-collar workforce. The article below, one of the most helpful we read on the subject this week, attempts to make sense of artificial intelligence's near-future economic impacts. |
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> The week the dreaded AI jobs wipeout got real. (Read) |
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> How do fintech companies like Cash App and Square make money? (1440 Topics) |
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