A River Flows Through It

vltava: Vltava River in Prague
The Vltava River flows through Prague and is after the imposing Prague Castle on the hill, the most notable feature of the local landscape.

Dot-com Confidence, and a Hard Look

Or maybe the word should be “arrogance” — because even in the wake of the current market debacle and the real-world return to rationality, the dot-com executives here at the European Technology Roundtable Exhibition managed to pretend they weren’t all that concerned. Good acting, I guess.

I had a useful chat with Paul Deninger, the chairman and CEO of Broadview, a mergers-and-acqusitions advisor focusing on information technology. He’s been outspoken for at least a year now about the ugly charade that has played out in the tech marketplace.

Entrepreneurs, venture capitalists, investment bankers and brokerages managed to shift almost all risk into the public markets by taking companies public ridiculously soon, often businesses that operated on a wing and a prayer, not any serious fundamental value. The people with the least information and the most to lose — average folks who bought into the hype and wanted into that “Internet stock thing” — were the suckers.

“Small investors are all at a disadvantage,” he says in a classic understatement.

But Deninger has a theory that the day traders, also among the biggest losers in the recent downturn, share the blame. Through profound ignorance of fundamentals, they created markets for companies that had unsustainable business models.

When companies needed secondary financing, the day traders were’t around, and helped create a double-whammy against survival.

“Day traders don’t own,” Deniger points out. “They trade.”

Most of them lose, too. It’s a shame if they’re dragging everyone down with them.

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