How the World Got Wired

Chapter 10 — The Day Everything Tipped

On the morning of August 9, 1995, in a small office in Mountain View, California, a twenty-four-year-old man lay down on the carpet and tried to take a nap.

He was exhausted. He hadn’t slept in two days. He was the chief technical officer of a company called Netscape, and at any minute now — he didn’t know exactly when — the stock market was going to start trading shares of his company for the first time in history. He would learn, in the next few hours, whether the work he had done over the past two years was worth a thousand dollars, or a billion dollars. He would learn it in front of the entire watching world.

The man’s name was Marc Andreessen, and you have already met him.

He fell asleep on the floor anyway.

What an IPO Really Is

Before I tell you what happened that morning, I should explain, more carefully than I did in Chapter 8, what was actually happening.

When a company is small and privately owned — by its founders, by a few employees, by a venture capital firm or two — there is no real price for that company. People can guess what it might be worth. They can argue about it over dinner. But there is no public number. The company exists in the world, and only the people who already own pieces of it know what those pieces cost.

When a company goes public, this changes. The company sells a portion of itself — not all of itself, usually a chunk of about ten or fifteen percent — to the general public, through a stock exchange. Anybody in the world with a brokerage account can now buy a share. The price these shares are sold for, multiplied by the total number of shares the company has, gives you the market value of the company: the price the public has voted that the whole thing is worth.

For Netscape, the moment of public voting was scheduled to start at 9:30 in the morning, New York time, on August 9, 1995. The shares had been priced the night before. The original plan, weeks earlier, had been to sell them at $14 each. As demand built up, the price was raised to $21. As more demand poured in over the final twenty-four hours, the bankers at Morgan Stanley — the firm running the offering — decided, in a late-night meeting, to double the price one more time, to $28.

This was already strange. Most IPOs do not double their price the night before they begin trading. There was a feeling, in the air, that something unusual was happening. People around the country, around the world, wanted to buy Netscape stock more than they wanted to buy almost any stock that had ever been offered.

The stock was supposed to start trading at 9:30. It didn’t.

It didn’t start at 9:31, or 9:45, or 10:00 either.

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