Emergence of a second Dot-Com boom? – An assessment of indications for overvalued Internet firms and the risk of another Dot-Com bubble

Abstract: The main goal of this thesis is to determine to what degree can there be observed indications for an overvaluation of Internet companies, which in turn may lead to the next asset price bubble in the Internet industry. By conducting an ex-ante analysis, the current study sets out to add additional knowledge in regards to whether and how well the emergence of a bubble can be determined in advance. The findings of this study show no statistically significant short sale constraints, no divergence in investors’ opinion and no negative abnormal returns upon the lock-up expirations for Internet firms, which would otherwise indicate them being overvalued. However, considering the announcement about Facebook’s IPO as an alternative event, the results suggest that there can be seen signs of overvaluation of Internet firms, indicating the possible entrance into a next bubble (i.e. early stage of a bubble).