I would like to introduce you to a company which (a) got really lucky with one investment (b) parlayed their gains into a bunch of other risky Internet investments (c) soared in value as it captured the imagination of the investing public. What is this firm, you ask? SoftBank? Well, sort of. But let’s hop back in the time machine and go back to the 1990s:
This firm was called CMGI. It started off in 1994 at a split-adjusted price of about $1.40. By the time the year 2000 began, the stock was trading at one hundred times that amount. It was, understandably, enormously popular and received accolades from the press, like this gem:
As 2000 began to unfold, doubts started to surface. No less a publication than the New York Times did this feature article with a prescient headline:
Indeed, as the company’s success stalled and began to unravel, the popular synonym for the company, based on its name, was Can’t Make Good Investments.
The founder of the place, who was a billionaire on paper at the time, issued this bizarre declaration:
Enhance. Investor. Support. OK, there ya go.
Perhaps I don’t need to show you the updated graph, but here it is. Simply stated, the stock that had gone from $1.40 to $1400 made the entire trip back down again. It was as if the years 1994-2020 hadn’t even happened.
And in the midst of this collapse, Wetherall made the following whine:
I put it to you that SoftBank is the CMGI of our time. And, until recently, it certainly had that 1994-2000 feel to it:
Although the first spasms of a downturn have begun to show.
This isn’t just about the WeWork debacle. That’s just the tip of the iceberg. Take a look at SoftBank in, say, 2023. I think the similarities will be much more plain by then.