Why did the share price of a pharma company skyrocket during the dot-com boom?

In the 1600s, during the Dutch golden age, it was the Tulipmania and then came the dot-com boom of 2000 and now we are in the Bitcoin Boom period. Throughout history, we have seen that booms like these are usually a stock market bubble, which leads to some drastic consequences. The question that now arises is,

What is the main reason behind the repeated history of these sudden booms?

Extensive research has been done on this phenomenon throughout time and the major reason is not some complicated finance or economic concept.

It is because of a basic human nature which is known as, "FOMO" or "Fear of Missing Out".

Let's dive deep into this concept through a very interesting occurrence that took place during the dot-com boom.

The birth of the internet led to the creation of some amazing companies like Google, Amazon, and many more. Today, you wouldn't think twice before investing in these mega-corporations, but that was not always the case, most of these companies came into existence in the 1990s and at that time, many investors were not familiar with the power of the internet.

In the early 1990s, Virtual reality was considered to be the next big thing. The Internet was considered to be just a phase because not many people understood its applications and thought it will not be a profitable investment for them.

But the release of Mosaic and subsequent web browsers in 1993 changed the perception of the internet and during the following years gave computer users access to the World Wide Web, popularizing the use of the Internet.

Between 1990 and 1997, the percentage of households in the United States owning computers increased from 15% to 35% as computer ownership progressed from a luxury to a necessity, This marked the shift to the Information Age, an economy based on information technology, and many new companies were founded.

By the year 1996, the Internet was getting the hype that it deserved and In April 1996, when Yahoo launched its Initial public offering (IPO), the share price skyrocketed by 270% on the first day and in May 1997 came the IPO of Amazon, whose share price rose by 31% in a day.

On February 16th, 1999, Mannatech Inc launched its IPO at the price of $8 and by February 17th, the price increased by 368% to $44.50.

But, Mannatech had nothing to do with the internet. It manufactured laxatives.

Traders saw Mannatech's name, with its "tech" suffix, and wrongly presumed it was another hot Internet company.

The main reason for this impulsive purchase was that during the dot-com boom, investors went internet mad and began buying up shares in companies with tech-sounding names.

It is the same feeling that you get when you are out shopping and see a product in the limited stock section, and we all perceive it to be of high quality that everyone wants to buy. We end up buying it so that we don't miss what others are using. When people see that an item is scarce, they fear missing it and end up buying it.

This phenomenon is called, "FOMO" or "Fear of missing out" and it is social anxiety stemming from the belief that others might be having fun while the person experiencing the anxiety is not present. It is characterized by a desire to stay continually connected with what others are doing.

FOMO is also defined as a fear of regret, which may lead to concerns that one might miss an opportunity for social interaction, a novel experience, or a profitable investment. It is the fear that deciding not to participate is the wrong choice.

Companies use FOMO for marketing purposes.

For example, when people are doing online shopping and they read positive reviews, ratings, and testimonials about your product which triggers fear of missing out to a great extent.

This is the reason why 72% of customers don’t take any action until they have read reviews and testimonials from existing customers.

By giving discounts to the first few hundred customers is another FOMO technique that is used extensively by marketers and advertisers.

Now, the new FOMO sensation is Cryptocurrency especially Bitcoin. In February 2021, Bitcoin smashed through the $53,000 barrier, boosting its price gain this year to 81% and its market capitalization neared $1 trillion.

Elon Musk (CEO of Tesla and SpaceX) changed his Twitter bio to #bitcoin on January 29, 2021, and it created a FOMO because of his strong personal branding in the market.

The result was that the price of Bitcoin skyrocketed from around $32,000 to nearly $38,000.

FOMO plagues a growing portion of the population—people who either overcommit and fail to fulfill many of their commitments or choose to avoid agreements and commitments as much as possible. A commonly felt sentiment of many people who have FOMO is, “I like to keep my options open.”

Check out this link for 10 practices to help free you from the grip of FOMO.