Opinion | Stop sensationalizing the tech market. These sky-high valuations are based on hype, not fundamentals

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Opinion: We need to stop sensationalizing the tech market. The hype and headlines that surround tech startups have replaced rational economic analysis.

Elon Musk’s Twitter takeover is crumbling because it was based on the same shaky foundations as so many tech valuations: Twitter’s stocks rose sharply due to the initial excitement following the announcement, then dropped to levels lower than they were before Musk’s big reveal. These fluctuations are not based on fundamentals. Instead, they are based on news and media connected to Musk’s celebrity. They are also based on questionable metrics provided by Twitter itself.

— yet in roughly a decade of trading, it has so far failed to return a profit. How can a company that’s consistently losing billions of dollars warrant such a lofty valuation?. However, it too has yet to record an annual profit, and in 2020 it posted an eye-watering loss of just under one billion dollars.

Suppose the stock price of a global, multibillion dollar company lies in the hands of one person. In that case, all it takes is for a scandal to come knocking at Musk’s door, and Twitter could collapse. A similar course of events happened to McDonald’s when former CEO Steve Easterbrook was found to have had “.” The fast-food company’s stocks subsequently sank dramatically, losing the company $4 billion.

 

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