Here’s How Snap’s IPO Just Proved We’re In a Tech Bubble

Mar 03, 2017

When investors reminisce about the height of the 1990s dot-com bubble, they often reference a now-iconic image of market euphoria, of taxi drivers turning into day traders and handing out stock tips to passengers. That's how you know—the saying goes—it's time to get out.

In 2017, the picture is apparently not so different, except now, of course, instead of cabbies we have Uber drivers, and people can buy stocks on a whim with the tap of a smartphone screen. They can even pick up shares of mega-hot stock Snap, the parent company of Snapchat, on the day of its IPO.

So when Snap stock popped 44% on its first day trading on Thursday (profits and shareholder rights be damned), telltale indications of a bubble were seemingly everywhere you looked—if you were looking.

But the clearest sign of the loftiness of our current atmosphere hit me that afternoon in the form of a video, which in just seven seconds, perfectly encapsulates a microcosm of the millennial-driven unicorn zeitgeist. Posted on Twitter (twtr) by the CEO of a Los Angeles startup, the brief clip features the entrepreneur in the back of an Uber. And the Uber driver tells the CEO he just bought one share of Snap (snap) for $25—on his phone, while he was driving:

You can imagine a world filled with self-driving cars where the idea of trading and driving is the least worrisome element of this scenario. And fortunately, the inefficiency of buying just a single share of a company is alleviated by the fact that the Uber driver used the brokerage startup Robinhood, which charges no trading commissions.

Still, the symbolic parallels to the dot-com era tech boom are undeniable. At a purchase price of $25 per Snap share, the Uber driver has already lost money—albeit less than $1. (Snap stock closed at $24.48 a share Thursday.) Robinhood, which has one million total users, says 43% of those who traded on Thursday bought Snap. The median age of those Snap investors: 26 years old, the same as Snap CEO Evan Spiegel.

While disappearing-photo app Snapchat may be most popular with millennials 25 and younger, it's hard to believe that such rookie investors would be equipped to successfully trade a stock like Snap, which has the richest valuation in tech IPO history.

In 2014, my colleague Adam Lashinsky, wrote of being convinced that we were in the midst of a tech bubble when the company Arista Networks (anet) called him—a full-time journalist—to directly offer him a slice of its impending IPO. Now, almost three years later, tech stocks are at all-time highs, Arista Networks stock has nearly tripled from its IPO price, and Lashinsky doesn't own any of it.

So even when evidence of frothiness mounts to the point where you're not sure if your head or the bubble will burst first, things have a way of getting even frothier. But lest we forget, we already know how this will end—we've seen it happen before.

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