12/14/25
S&P 500: 6827
Nasdaq: 23,195
10 Year Treasury: 4.1%
David R. Snyder, CFA
One of the most underrated and significant events was the hypergrowth and “work from home” stocks as well as crypto bubble in 2020-21. The EV/EBITDA and price/sales ratios for the median or equal weighted internet and software/cloud stocks reached levels very similar to the levels in 1999-2000. Snowflake (SNOW 268), for example was trading at over 100 times forward sales in 2021! The only difference was that the largest growth stocks were trading at much lower valuations than in 1999-2000. I wrote over and over about this bubble from November of 2020 through February of 2021, predicting it would burst within a couple of months which it did. I predicted that the hypergrowth stocks with the ARK Innovation ETF (ARK 76) being the best proxy, would be the Nasdaq of 2000, Which was correct, as both fell about 80%. The “work from home” stocks also were trading at their highest historical valuations boosted by the unprecedented $8 trillion of monetary and fiscal stimuli. Anything tied to “stay at home” including ecommerce of course went into bubble territory. Consumer goods were 31.5% pre-Covid but increased to 34.1% in first quarter of 2021. It is now back to 31%. I argued repeatedly that it was pull forward, a contrarian call, which again proved correct. Home Depot (HD 362), for example had eight consecutive quarters of negative same store sales from 2023-24. Most of these stocks still have not recovered and probably won’t recover until after the next recession. I wrote in 2020-2021 that SPAC’s were one of the worst structured product investments ever and have only invested in Draftkings (DKNG 35) and Sofi (SOFI 26).
Crypto was also part of this bubble as the total value of all crypto declined 80% from $3.2 trillion to $650 billion from October of 2021 through January of 2023. It now has the same value as four years ago, underperforming the stock market significantly with much more risk. The metaverse and NFT craze also came undone in late 2021. Metaverse properties and NFT prices declined 98 to 99% from their peaks with 95% of NFT’s now worthless. I wrote in 2021 about the coming crash in these speculative so called assets and was told that I couldn’t see the future. I actually believe in the metaverse but not at the prices of 2021, especially for virtual land. As for NFT’s just never understood the concept of paying to own something digital when copies are available online. There will be some case uses for NFT’s such as gaming and ticketing, but just about everything will be tokenized, thus everything linear will be digital. Why should something be worth more in digital form?
SPAC’s were the most speculative of these hypergrowth stocks. There were 861 SPAC IPO’s in the 2020-22 time period, raising $250 billion. There were 488 SPAC business combinations from 2021-23 totaling $470 billion. In 2022 the de-SPAC index fell 75%. More than 90% of them trade below their $10 IPO price.
SPAC’s were about 50% of all IPO’s from 2020-21. The number of IPO’s in 2020-21 was almost double the number of IPO’s in 1999-2000 (1522 to 819). Total capital raised was $505 billion in 2020-21 vs. $177 billion in 1999-2000. Adjusting for the increased value of the stock market in 2020-21 vs. 1999-2000, the total value raised was similar between the two periods. However, if we add in the additional $700 billion in de-SPAC transactions which were essentially IPO’s, the total value of IPO’s in 2020-21 dwarfed the IPO’s from 1999-2000. Even if the $250 billion of SPAC IPO’s is subtracted from the $700 billion in de-SPAC transactions because most of that money was used to buy the private companies, the 2020-21 period still is much higher in terms of capital raised for new public companies.
The average IPO first day performance in 1999 was 90% and 170% for the year. In 2020 the average first day IPO performance excluding SPAC’s was 38%, and 41% for the first six months of 2021. Also many of the de-SPAC deals caused spikes of 50% or more on the day they were announced. Not as strong as 1999-2000 but still very speculative. I was one of the few who wrote negative reports on SPAC’s and hypergrowth stocks in 2020-21 before the bubble burst.
The aftermath of the hypergrowth/SPAC bubble was a disaster. Between the hypergrowth/SPAC stocks and the “work from home” stocks, there were almost 1000 stocks that lost at least two-thirds of their value from their highs in 2021 to their lows in 2022-23. Most of them have not recovered their losses four years later. It is significantly under-discussed. This was a tremendous bubble that burst. Affirm (AFRM, 70) for example, as well as it has done the last couple of years is still 60% below its 2021 high. Ditto SNOW. It is relevant today because those kind of bubbles only happen once in a generation as I wrote back in 2021. We are unlikely to have another hypergrowth and IPO bubble on the same scale as 2020-21 before this secular bull market ends.
Full Disclosure: I own several of the securities mentioned positively. None have been purchased within the last month. The opinions merely represent the opinion of the author as CIO of Journey 1 Advisors, LLC and intended to inform the readers about our investment philosophy and strategy. The contents of this report are based on sources believed to be reliable. It is not intended for circulation. It is not intended to offer investment advice, or to recommend the purchase or sale of any securities or investment product. Investment advice is only given after a client has signed an investment advisory agreement with Journey 1 Advisors, LLC and will be subject to the terms and conditions therein. Your decision to buy or sell a security should be based upon your personal investment objectives and should be made only after evaluating the stock’s expected performance and risk.