Stocks on a roller-coaster ride.
Stocks mentioned in this story: SCHW, TYC, MU, CSCO
Spied from a helicopter above Manhattan, Wall Street appears fairly straight, with a gentle bend at Pearl Street. But in the jittery geography of the trading world, stocks often endure hairpin turns with enough velocity and violence to throw them into the Hudson River. What makes a stock skyrocket only to thud like a queasy Central Park pigeon? Sometimes it’s corruption, unsustainable hype or a failed buyout. Here are eight stocks with bounces that propelled shareholders on a ride of bungee cord proportions.
Enron Corp.
Some bounces are more crash landings and the scandal surrounding the former Houston energy behemoth took investors from the trading pit to the fiery pit. On New Year’s Eve 1999, Enron stock closed at $44.38 a share. A year later, it had nearly doubled to $83.13. And by New Year’s Eve 2002? Just 6.2 cents a share. Worse yet: Investors were told by CEO Kenneth Lay to expect Enron shares to hit roughly $140 — while he and other execs dumped their stock.
Value America
Long before Amazon.com (ticker: AMZN), Value America sought to connect the internet’s first shoppers directly to manufacturers. “The company went public in April 1999 by selling shares at $23 and closed on the first day it publicly traded at $55 per share,” says Robert Johnson, president and CEO of the American College of Financial Services in the greater Philadelphia area. But logistical problems with shipping and billing shipwrecked the company. By August 2000, VUSA traded for 72 cents a share.
Charles Schwab Corp. (SCHW)
The discount brokerage firm rose more than 400 percent from 1998 through the peak of the dot-com bubble. “In 1999, Schwab’s stock market value exceeded that of Merrill Lynch, an amazing accomplishment for an upstart financial firm,” says Daniel Kern, chief investment strategist with TFC Financial Management. But the dot-com fallout and the ill-fated acquisition of U.S. Trust in 2000 hurt shareholders and Schwab stock fell by 80 percent until bottoming in early 2003. The stock has more than doubled since and now trades at $29 a share.
VA Linux
The company that combined open-source Linux software with Intel-based hardware went public on Dec. 9, 1999, at $30 per share — and closed at $239, shattering all records for a first-day IPO. “By July of 2002, a scant 32 months later, the stock had fallen by more than 99 percent from its all-time high of nearly $243 to 54 cents a share,” Johnson says. The firm changed its name and business approach several times, is now known as Geeknet, and owned by the gaming retailer GameStop Corp. (GME).
Tyco International (TYC)
With a successful portfolio of security systems, electronic components and medical device businesses, “Tyco was an investor darling, rising nearly 300 percent from 1998 through 2000,” Kern says. But in 2002, it plummeted nearly 80 percent as CEO Dennis Kozlowski and other senior executives were accused of looting the company. Kozlowski’s abuses made headlines “after footage surfaced of the $2 million toga party in Sardinia that Kozlowski hosted to celebrate his wife’s birthday.” It featured an ice sculpture of Michelangelo’s David urinating vodka, perhaps apt considering what happened to shareholders.
Celera Genomics Group
Celera was one of the first firms to successfully map the human gene sequence, and as a consequence the company mutated from $7 per share in April 1999 to $276 in March 2000, thanks to the promise of drug-related patents. “But if you held Celera for a few more years, you saw it fall to about $8 per share,” says Keith Baker, professor of mortgage banking at North Lake College in Irving, Texas. Competing companies had quietly sought patents, while world leaders called for genome information to be made public.
Micron Technology (MU)
Follow the bouncing chip: MU went from $9.43 a share in August 1996 to $97.50 on July 1, 2000, and then back down to $8.21 on Feb. 1, 2003. “Everyone wanted to own something connected to the internet and Micron was a play on semiconductors,” says Carlos Martinez, professor of economics at Richland College in Dallas. Still around, Micron has also gone through a more recent if smaller bounce — from $7 a share (January 2013) to $36 (December 2014) to its current price of $12.19.
Cisco Systems (CSCO)
Unlike many a high-tech company splattered when the dot-com bubble burst, Cisco has survived — and is today the largest networking-equipment company in the world. Yet it’s no longer the world’s most valuable company, as it was on March 24, 2000. On that day, CSCO hit $79.38 a share, up more than five times from just 18 months prior. A year later, it was trading at $15.91. Competitors played a large role in the bounce as they chipped away at Cisco’s market share.
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8 Soaring Stocks That Suffered the Big Bounce originally appeared on usnews.com
