VA Linux

With a lot of Web 2.0 companies going public lately and some talk of a speculative bubble, I thought it'd be good to illustrate the apex of insanity during the first dotcom bubble w/charts of VA Linux.  In December of 1999 the open source software company became regarded as the most 'successful' IPO of all time with a pricing at $30/share and an opening print of 299, traded as high as 320 but then closed at 239.25 on the day.

 A couple articles from the web 1.0 media recap what happened first in real time and then a decade later:

 Dissecting the VA Linux IPO from salon.com

10 years gone: The VA Linux Systems IPO from cnet

Click on chart to enlarge

Pretty wild that at the end of the day LNUX had a market cap of something like $7 billion and that year only did around $20 million in revs reporting a loss, of course, of around $15 million.  Of course it wouldn't last and within a year the stock was under $10.   By the time the lockup expired six months after the IPO it was just a little bit above the IPO price of 30 by trading at 38.50 which is really tough luck for the insiders. 


End of Lockup Period for VA Linux Doesn't Feel Too Liberating  sfgate.com

Click on chart to enlarge

That era was a wild time and while I was too young at 19 to get a piece of it but as a consolation I was able to witness some of the insanity being on an order desk at the CME directly below the NASDAQ pit.  In the future I'll roll out some more dotcom stocks but am trying to stick to futures.

Believe it or not, VA Linux still exists in some form as it was bought by Geeknet now under the symbol GKNT.

Euroswiss

Alright I'm gonna kick off the new blog with a more recent extreme move that totally changed my perception of how short term interest rate futures can trade.  Simply put the value of a contract is 100 - value to equal the interest rate, for instance Sept 2012 eurodollars are currently 99.40 which indicates an interest rate of 0.60%.

In late 2011, the euroswiss contract (3month libor rate on swiss franc borrowing) traded as high as 100.71 on August 18th indicating a negative rate of 71 basis points!  It's quite apparent from the chart below of the Dec 11 Euroswiss contract that once it pushed through the zero barrier, the liquidity thinned out and a parabolic move ensued.  (Click on charts to enlarge)

Somewhat confusing for me is that euroswiss peaked on August 18th but the actually currency itself peaked on August 9th. 

On September 6, 2011 the swiss franc was effectively pegged against the euro w/a floor of 1.20 and on that day the CME's SFZ11 had a range from 128.54 to 116.37, closing on it's low.

As always, I'm looking to be enlightened in the comment box if anyone can add anything further beyond the obvious.  There isn't much written on negative interest rates but I simply presented these charts to show the chaos of a liquidity squeeze.  FYI, euroswiss is still indicating a slightly negative interest rate at the moment.

As General George Patton noted, “Fixed fortifications are a monument to the stupidity of man" and the same goes for fixed market ideas.