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Why 2021's surging stock market is not like 1999, according to Steve Case

Julie Hyman
·Anchor
·3 min read
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Chinese electric bicycle-maker EZGO Technologies (EZGO) leapt more than 250% in its first day of trading. TS Innovations Acquisitions Corp. (TSIA), a blank-check company, jumped 45% after announcing it was merging with Latch, a building tech firm. Another Chinese debut — this one a vaping platform called RLX Technology (RLX) — more than doubled in its first day of trading. And shares of another special purpose acquisition company (SPAC), FTAC Olympus Acquisition, surged 30% after a report it was in talks to merge with online payments specialist Payoneer.

That’s all just in the past week.

For investors of a certain vintage, this might call to mind the heady days and subsequent crash of 1999 — and that’s before even delving into the current GameStop/Reddit chatroom-induced mania.

But according to one prominent investor who had a front-row seat and lived to tell the tale, there are some key differences.

“1999, obviously, the internet was just coming of age,” Steve Case, co-founder of AOL and CEO of venture capital firm Revolution, told Yahoo Finance. “Any company with dot-com in their name, people were interested in investing in. Many had little or no revenue, and in some cases didn’t know what their business model was going to be. It was a pure concept dynamic. That’s not what we’re seeing today with IPOs or SPACs. There’s more granularity in terms of their growth trajectory.”

NEW YORK, NEW YORK - SEPTEMBER 24: Steve Case, Chairman & CEO, Revolution, speaks onstage during the 2019 Concordia Annual Summit - Day 2 at Grand Hyatt New York on September 24, 2019 in New York City. (Photo by Riccardo Savi/Getty Images for Concordia Summit)
NEW YORK, NEW YORK - SEPTEMBER 24: Steve Case, Chairman & CEO, Revolution, speaks onstage during the 2019 Concordia Annual Summit - Day 2 at Grand Hyatt New York on September 24, 2019 in New York City. (Photo by Riccardo Savi/Getty Images for Concordia Summit)

That’s not to say every contemporary startup or public offering is worth buying. Case, whose Revolution runs three VC funds, said he’s being “careful” and “disciplined,” making only three or four investments in a year.

Some of those investments have paid off handsomely. One of them, DraftKings (DKNG), went public through a $3.3 billion SPAC deal last April; the shares have more than tripled. To Case’s point on sales, revenue nearly doubled in the online gambling company’s third quarter; it’s due to report its latest results on Feb. 26.

As for stock valuations overall, Case said while some stocks may be pricey, others have been left behind with the focus on momentum plays.

For market actors who focus more on the macro picture, though, the combination of high-flying IPOs, SPACs and seemingly — dare we say it — irrational exuberance in stocks like GameStop (GME) is confounding their models.

Morgan Stanley Investment Management’s Andrew Slimmon says they could be harbingers of a short-term market top.

But Lori Calvasina, RBC Capital Markets’ head of U.S. equity strategy, told Yahoo Finance that while she’s watching retail-investor action closely, the picture isn’t clear. “The problem for someone like me is, there’s no data to analyze. We know it is telling us something about how much risk is out there, but just because it has bubbled up today, is that telling us we’re at a top in the market now? I think you can’t make that argument. I think this could go on for a while.”

Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9am-11am ET. Follow her on Twitter @juleshyman.

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