Prepping for the next ‘bubble burst’

Adam Lashinsky, Sr. Editor at FORTUNE Magazine has an interesting perspective on the next ‘bubble burst.’  How did he find it?  Receiving an offer for ‘friends & family’ shares ahead of a tech startup IPO;

FORTUNE — I was surprised but not completely flabbergasted by the phone call I received a few weeks ago. A representative of Arista Networks, a networking company I’ve written about recently, phoned to inform me that the company’s chief executive wanted to offer me “friends and family” shares in Arista’s upcoming initial public offering. The offer was explicit, down to the number of shares I’d have the opportunity to purchase at the I.P.O. price. The caller specifically wanted me to understand this offer came directly from CEO Jayshree Ullal.

I declined. I briefly explained that it was impossible for me to accept the gift that was being offered. I also told the (clearly uncomfortable) Arista rep, with whom I’ve dealt for stories forFortune, that it is a horrible idea to be making these shares available to me. That’s because the company must be similarly propositioning other business partners who, like me, are neither a friend of the company nor family members of its employees.

Here’s the best part – he’s seen the same thing before, and – in noting the events and trends at work, can see it happening all over again;

It’s not the only sign. Calling a bubble is something of a fool’s errand. Some will rely on comparative valuation analysis to argue that private and public prices for companies are overvalued. That’s fine though imprecise, and almost no help in terms of timing. Others will point to scarcity of real estate, salaries paid for engineers, or the inability to nail down a reservation at a hot San Francisco restaurant. All are good tells of a tech bubble.

 

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