Some publicly listed Internet startups have less than six months to live if they continue current earnings trends, Macquarie Investment Management's chief investment officer Greg Matthews has warned.
And offering some advice to investors, Matthews said people interested in Internet startups should have a wide portfolio of Net stocks or suffer the consequences of a bursting Internet bubble.
Matthews, who at a roadshow later this week will tell investors that the Internet bubble is already bursting one company at a time, said Macquarie Bank is telling its clients to "watch out and be very, very careful" when it comes to Net stocks.
"It is important to look at the capabilities a company has of making money in the future, and how fast they are burning cash at the moment," Matthews said.
While Matthews said some companies would find a long-term solution to bankruptcy by issuing new, discounted shares, or acquiring a profitable company, he said others were placing themselves under "tremendous pressure" by incurring increasing amounts of debt.
Matthews blamed the market and listing companies for over-priced Net stocks.
He said investors were playing the "greater fool" theory in which they purchased over-valued stock in an attempt to on-sell it to someone else willing to pay an even more inflated price. Other companies were simply over-hyped at the pre-IPO stage.
Matthews said there are major corrections already happening to individual Net stocks and cited the share prices of Yahoo! -- down from more than $US500 a share last year to approximately $US350 now -- and local online broker E*TRADE, whose shares peaked at almost $11 last year, but are now trading at less than three dollars.