Pets.com at 25: One of the cautionary tales of animal spirits running rampant

[Meme Stock Mania business text message on signboard. Business graph , arrows and growth concept. Green background]
design master

The dot-com bubble of 2000 is hard for many grizzled investors to forget due to the sudden reversal of investor sentiment and painful losses as high-flying dot-com stocks lost value quickly.

Looking back at the period of investing history, Pets.com was a San Francisco-based online retailer that became an iconic symbol of the dot-com bubble's unbridled animal spirits. The company launched operations in November 1998 with a goal to revolutionize pet supply shopping.

Pets.com initially caught fire with investors because of its easy-to-use website and a recognizable brand. The company also had a key partnership with emerging e-commerce site Amazon (AMZN [https://seekingalpha.com/symbol/AMZN]). Notably, Pets.com's sock puppet mascot also became widely known after an aggressive marketing campaign by the company. However, the underlying business simply could not keep up with spiraling operational costs, and the highly promotional pricing strategy cut deep into margins.

Amid the dot-com bubble bursting, Pets.com's share price tumbled to $0.19 in November 2000, just nine months after its IPO was priced at $11 per share and reached an all-time high of $14.00 a few days later. The end was written when Pets.com announced on November 9, 2000, that it would cease taking orders and would shut down operations due to unsustainable losses and failed acquisition efforts. The company was later officially delisted from the Nasdaq in January 2001, failing to reach the one-year anniversary of its IPO before declaring bankruptcy.

Since then, the saga of Pets.com is widely considered a cautionary tale for investors of focusing on growth stories without considering if a business has a track toward sustainable profitability.

The business of selling pet supplies online eventually became viable, with Chewy (CHWY [https://seekingalpha.com/symbol/CHWY]), Petco Health and Wellness (WOOF [https://seekingalpha.com/symbol/WOOF]), and Freshpet (FRPT [https://seekingalpha.com/symbol/FRPT]) some of the main players.

While the dot-com bubble is very different from the retail-driven meme phenomenon, the risk for investors is that volatile swings lower could be seen if risk-off trading picks up. ETFs with a focus on stocks with a heavy following on social media sites include the VanEck Social Sentiment ETF (NYSEARCA:BUZZ [https://seekingalpha.com/symbol/BUZZ]) and SoFi Social 50 ETF (SFY [https://seekingalpha.com/symbol/SFY]). Some stocks that have seen meme-type action over the last few years include Beyond Meat (BYND [https://seekingalpha.com/symbol/BYND]), Krispy Kreme (DNUT [https://seekingalpha.com/symbol/DNUT]), GoPro (GPRO [https://seekingalpha.com/symbol/GPRO]), Opendoor Technologies (OPEN [https://seekingalpha.com/symbol/OPEN]), GameStop (GME [https://seekingalpha.com/symbol/GME]), AMC Entertainment (AMC [https://seekingalpha.com/symbol/AMC]), SoundHound AI (SOUN [https://seekingalpha.com/symbol/SOUN]), BlackBerry (BB [https://seekingalpha.com/symbol/BB]), SoFi Technologies (SOFI [https://seekingalpha.com/symbol/SOFI]), and Super Micro Computer (SMCI [https://seekingalpha.com/symbol/SMCI]).

MORE ON MEME ETFS

* BUZZ: Strong Gains, High Volatility [https://seekingalpha.com/article/4826913-buzz-etf-strong-gains-high-volatility]
* BUZZ: Beware The Bearish August-September Trend In Social Media Darling Stocks [https://seekingalpha.com/article/4807914-buzz-beware-the-bearish-august-september-trend-in-social-media-darling-stocks]
* Return of the meme rally? Beyond Meat jumps 82%, Krispy Kreme pops 30% and GoPro spikes 18% [https://seekingalpha.com/news/4506694-return-of-the-meme-rally-beyond-meat-jumps-82-krispy-kreme-pops-30-and-gopro-spikes-18]
* Seeking Alpha’s Quant Rating on VanEck Vectors Social Sentiment ETF [https://seekingalpha.com/symbol/BUZZ/ratings/quant-ratings]
* Dividend scorecard for VanEck Vectors Social Sentiment ETF [https://seekingalpha.com/symbol/BUZZ/dividends/scorecard]