Extraordinary Genius

Chapter 1088 – The bubble burst

The judge had found Microsoft had committed monopolization, and this means Microsoft will be slapped with hefty fines and risked a breakup.

On the same day, many financial institutions noticed the Nasdaq Composite had exceeded 5,000 points. It had increased more than one time in one year!

The financial institutions saw Microsoft is going to lose the trial. The companies that have dealings with Microsoft will be affected. So, they decided to sell away those shares.

At the same time, some shareholders of the tech firms also started selling their shares, and it resulted in the Nasdaq Composite fell by 5% that day.

Of course, the fall also has something to do with Feng Yu. Feng Yu, Kirilenko, and Fu Rongqi dumped their remaining shares together on this day.

Feng Yu, Kirilenko, and Fu Rongqi were surprised to find out that someone else is manipulating the market. When they short the Nasdaq Composite, they noticed someone had built a short position portfolio before them.

Yesterday, when the Nasdaq Composite reaches a new peak, someone had started to build a short position portfolio. How can they be so sure that the Nasdaq Composite will plunge?

Unless this person has insider information from the financial institutions will be dumping their Microsoft, Cisco, Dell, etc. shares together.

How influential is this person to have connections with so many financial institutions?

Feng Yu thought for a while and felt only one person can do this. Soros from Quantum Fund!

Only Soros dares to do such things and have access to insider information from the financial institutions. Also, shorting the market is his modus operandi.

Feng Yu cannot confirm this, but he doesn’t care. He and his friends had started building their portfolio when Nasdaq Composite reach 5,000 points. Although they are not using high leverage, from today’s market performance, there will be panic selling tomorrow, and the stock index will plunge further.

Microsoft’s trial is the spark that ignites the fire. After Feng Yu sold his Microsoft shares, Microsoft share prices stop rising. However, the share prices of other companies are still shooting up like crazy.

Most of the companies, whose share prices are shooting up like crazy are still not making profits. Their expenses are greater than their income, and their share prices are increasing faster than Microsoft. This company is making high profits.

Those companies are only selling their ‘creativity’ and ‘concepts,’ and no one knows their concepts will be materialized. This is like gambling. If the investors won the bet, they would get high returns. As for losing the bets, those investors had never thought they would lose.

For continuously two years, venture capital investment companies had invested heavily in tech firms. Their reviews of these tech firms had become lax, and everyone wants to profit by getting these companies listed.

Someone said that those companies are have nothing to do with Microsoft’s trial because those listed companies’ financial reports showed most companies are making losses.

This is an alarm bell for many investors. Not all companies that are listed will be profitable. Those tech firms’ assets might increase, but they are spending the money they raised from the stock market.

The beautiful picture painted by those tech firms are too far away, and many of these tech firms had finish spending the money they got from the stock market and venture capital investments. But they are still making losses!

The companies used the money from investors to acquire and merge with their competitors, introduce new services, and promoting their brand

The actions of these tech companies formed a bubble, and the bosses had never considered why and how can their companies be worth so much? How can Yahoo be worth more than 100 billion with its products? How much are Yahoo’s annual profits?

This is a bottomless pit. Who will still dare to invest their money into it?

Many people felt the release of these companies’ financial reports had triggered the bursting of the bubble.

Another rumor is the Millennium bug will cause chaos with the tech firms, and the firms had to spend their funds to fix this problem. Thus, increasing the financial pressure of those firms.

There are supporters of all sorts of theories. Still, regardless of the reason, Nasdaq Composite plunged, and the technology-related companies are most badly hit.

Feng Yu has another calculation method to calculate the actual rate of returns of those Nasdaq shares.

From the start of 1998, the actual rate of return in Nasdaq is less than 3%. The returns are lower than Bonds and lower than the expected 6.5%.

Some researchers felt all the shares were at least 7% higher than its reasonable value.

That means the Nasdaq shares are overvalued, regardless it is Microsoft, IBM, or Dell, etc. are all irrational exuberance.

But now, the internet bubble had burst, and these overvalued companies’ share prices had plunged and will be most badly hit.

......

Nasdaq shares start to plunge like crazy and start to affect NYSE shares to fall. Many unrelated companies were also implicated.

A rumor started, saying the stock market will crash again. Even Microsoft, IBM, and other blue-chip companies cannot stop it!

Hence, more people start to panic and tries to dump their shares, forming a vicious cycle.

The more people sell their shares, the faster the share prices fall. The faster the share prices fall, the more people will sell.

Within a week, Nasdaq Composite fell by almost 10%. It is the biggest fall in more than a decade.

The impact of this stock market crash spreads worldwide, and all major stock markets are affected.

Paul Allen is now regretting. If he knew Microsoft share prices will continue to fall, he would also sell some of his shares in the first place. He still has many non-voting shares, and even if he sells them, it will not affect his status in the company.

Paul Allen felt he should have invested his money elsewhere. No matter what the returns are, it will be better than seeing his assets shrinking every day.

But the fall is not showing any signs of stopping.

Other than Microsoft, IBM, Dell, and other MNCs are holding director meetings every day to think of ways to save their companies. Everyone is trying to stop their share prices from falling.

Although the share prices had plunged, it does not affect the companies’ operations. However, it will affect the company’s branding, reputation, shareholders, etc. When the share prices fall, the shareholders’ assets will also shrink.

Everyone is puzzled, how did the internet bubble burst so suddenly?

Translator’s notes:

The United States v. Microsoft Corp.