1995: The year the future began
As a postscript to the recent coverage revisiting Netscape’s eye-popping IPO of August 1995, it’s worth recalling how the leading newspaper of Silicon Valley carried the news — and what it emphasized instead.
Dilemma seemed to lurk on the front page of the San Jose Mercury News on August 10, 1995, the day after Netscape Communications, a Silicon Valley startup then just 16 months old, shocked financial markets with an enormously successful initial public offering of shares.
Netscape, maker of the very popular Web browser called Navigator, offered some 5 million shares at $28 per share — and opened after nearly a two-hour delay at $71. Share prices climbed as high as $74.75 before settling at the close of trading at $58.25.
It was a stunning launch that had the corollary effect of illuminating the early Web for millions of people.
Before dawn on the day of Netscape’s IPO, counterculture hero Jerry Garcia died of a heart attack at a drug and alcohol treatment center near San Francisco. Garcia, who had turned 53 eight days earlier, was founder and front man of the immensely popular Grateful Dead. The band’s final show with Garcia had been just a month before, at Solider Field in Chicago.
So which story would lead the Mercury News in its edition of August 10, 1995? Netscape’s IPO, which signaled the entry of the World Wide Web into mainstream consciousness? The death of Garcia which, despite his declining health, had shocked and surprised so many people?
Twenty years ago yesterday, stories about Garcia and Netscape were crammed into the upper reaches of the Mercury News front page.
Somewhat surprisingly, perhaps, Garcia’s death received more expansive treatment.
The Mercury News published two front-page articles about Garcia, one nearly 1,100 words and the other more than 900 words. They were accompanied by two prominent photographs, one of Garcia and the other of fans in mourning.
The longer article noted the many reactions posted online about the musician’s passing and declared that “one of America’s most distinctive subcultures” was in mourning “over the death of a musical legend.
“Jerry Garcia, leader of the Grateful Dead rock band and guru figure for tens of thousands of fanatically loyal ‘Deadheads,’ was found dead earlier Wednesday ….
“The 53-year-old singer, guitar player and composer was frequently ill in recent years from diabetes and the effects of drug and alcohol abuse. But he and his band continued to fill auditoriums, making the Grateful Dead one of the most long-lived and financially successful rock bands.
“Over the past 30 years, the Dead held onto its loyal followers while expanding its audience to include everyone from homeless youth to middle-aged politicians. News of Garcia’s death generated so many on-line inquiries and outpourings of grief that they caused gridlock on some lanes of the information superhighway.”
The Mercury News account about Netscape’s IPO was decidedly more reserved, and even rather skeptical. The article made the point that Netscape had never turned a profit, which, for successful IPOs at the time, was quite unusual:
“After months of anticipation, Wall Street answered a burning question for believers in the Internet: What’s the value of a 16-month-old company that faces vicious competition, has never made a profit and gives its product away?
“In the case of Netscape Communications Corp., the answer Wednesday was $2.3 billion, or $58.25 a share. But that was the final gasp of the Mountain View startup’s first wild day on the public market. …
“The first trade was for an amazing $71 — more than 1 1/2 times the initial offering price — and it quickly climbed to $75.
“That hysteria cooled significantly as the day progressed, with the price dropping to $53.75 at one point. But it rebounded by day’s end to $58.25 — a 108 percent gain that ranks as the third-biggest first-day jump in Wall Street history.”
A week after the IPO, a commentary in the Mercury News returned to the theme of skepticism, stating:
“Investors went absolutely bonkers last week over a company called Netscape Communications Corp., which has never earned a dime in profits but which happens to make what at this moment is a very sexy product: computer software for users of the Internet. …
“When the stock hit the market on Wednesday, frenzied investors drove the price to $75. It’s now settled down at about $50 — meaning that the company is valued at around $2 billion, or over 100 times projected earnings two years from now.
“It seems that lots of otherwise smart Americans continue to believe that the way to succeed is not through diligence, frugality and imagination — values of the past — but through cleverness, quick trading and connections.”
It wasn’t quite as stark as all that. And Netscape’s IPO proved more consequential than was recognized at the time.
As Ray Hennessey of Entrepreneur.com wrote a couple of years ago, “Netscape’s deal proved that Wall Street would take a chance on something unproven but with tons of potential. Netscape was young, and its promise was built on a revenue model, rather than profitability. …
“Before then, companies needed a stronger track record to experience a successful IPO. Venture capitalists took chances. Wall Street didn’t.
“That changed with Netscape.”
Quite so. A lot changed with Netscape.
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