Is there still any doubt about whether or not we're seeing a new tech bubble?
LinkedIn Corp. (NYSE: LNKD) is down some more than 30% from since its initial public offering (IPO) and Pandora Media Inc. (NYSE: P), which had a strong debut just last week, has dropped 35%.
Indeed, billion-dollar valuations for companies like Pandora and online coupon site Groupon Inc. have lured tech-hungry investors into buying what they think is the next big Internet stock. But the reality is that these companies are driving demand through low-float IPOs and undeliverable growth promises.
Investors need to understand that despite the excitement surrounding Internet and social media companies, the chance that these businesses will deliver on profitability promises is slim to none.
The fact that these companies were able to garner as much investor interest as they did raises a red flag that suggests a new tech bubble has formed - and is ready to burst.
"It's 1999; I wouldn't touch any of them," said Money Morning Contributing Editor Martin Hutchinson. "Every possible warning bell is telling me this is a bubble and we're close to its maximum inflation."