Private investors still have billions in losses from tech stock bubble
Lost money may never be recovered
|
|
|
By Jarmo Huhtanen
The combined market value of the technology firms that became listed on the Helsinki Exchanges around the turn of the millennium is still less than one quarter of the value from May 2000, when the All-Share Index of the Helsinki Exchanges reached its all-time high.
In practice, nearly 12 billion euros have disappeared from the market value of new technology companies.
During 1999 and 2000, over 20 tech firms became listed on the Helsinki Exchanges. Only 3.5 billion remain of their record market value of over 15 billion euros. For example, the market value of software company Comptel is now only eight percent of its record figure.
"The first-timers lost in the tech bubble. People learn from the experience after they have seen one bubble. However, relatively few people have confessed to me that they lost", says Jorma Kokko from the Finnish Shareholders' Association.
Kokko recalls that after the stock market crash he received phone calls from incensed investors who had lost practically all their money. The investors sought to name banks as scapegoats, as banks had held marketing events where customers had been encouraged to invest in stocks.
"The people were very angry and they felt betrayed. I advised them to contact the Finnish Securities Complaint Board", Kokko says.
The loss in market value suffered by the recently-listed tech firms is so substantial that the people who invested in their shares will most likely never recover all their money.
"The majority of the private investors who invested at the time have not realised their losses, either because they do not understand capital gains taxation or they are waiting for a new stock boom", suspects Jarl Nordin, the head of the Helsinki Shareholders' Association.
There are most likely thousands of private investors in Finland today who own shares they are reluctant to sell, as they are hoping for better times. The exact figures are unknown, as no one has studied the issue in detail.
"Very few investors wound up making money. There were many young people who invested everything and also lost everything. It will be some other generation than the current one that will sell Sonera for 96 euros again", Nordin muses.
According to Professor of Finance Vesa Puttonen from the Helsinki School of Economics, the tech bubble burst at exactly the right time.
"Around the time when the stock market bubble burst, Helsingin Sanomat published a study that revealed that people were just beginning to consider borrowing money in order to invest. It would have been disastrous if that had happened."
Puttonen points out that in the initial public offerings, private investors were allocated only small numbers of shares, as the demand for the shares was so high. He also emphasises that the crash of 2000 differs clearly from the events in the early 1990s.
"In the early 1990s some people suffered terrible fates when they lost everything after investing with borrowed money. At the turn of the millennium investors actually only lost surplus funds, as very few had become indebted."
IT service and software company SysOpen was one of the tech firms that became listed in 1999. Through its IPO it received over 3,800 new shareholders, the majority of whom were private investors.
During the course of the following winter, the number of shareholders fell under 2,000, but now the figure has climbed back up to 3,300.
"The behaviour of private investors is not monitored systematically", says Kari Karvinen, one of the founders of the company and the current Chairman of the Board at SysOpen.
"I do not know if the people who invested in tech stocks will ever recover their money. In extreme circumstances the expectations regarding returns are quite high. Hopefully the situation will improve, but it may be that they never get their money back. No matter how much we try to hope that our share price would be at the record level of 23 euros, it is not very close since we are now priced at four euros."
According to Karvinen, unlisted companies in particular have rosy daydreams about their market values, which hampers merger and acquisition activities.
"Sometimes it feels like only the prices of listed companies have fallen", Karvinen remarks.
Karvinen takes a long time to consider the question of whether there are currently any tech firms listed on the Helsinki Exchanges that do not belong there. "That is a good question, since trading volumes are so low these days. But I will not pass judgement that someone should not be listed."
Helsingin Sanomat / First published in print 23.4.2004
JARMO HUHTANEN / Helsingin Sanomat
jarmo.huhtanen@hs.fi
