If you bring up bad news about the price of technology stocks on Twitter, very helpful people will send you multi-year charts that put recent declines into historical context. Yes, thank you; I was not aware you could zoom out.
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The instinctual need to proclaim that selloffs of tech stocks don’t matter is either a bad-faith argument or poorly disguised fear. More on that in a moment. Regardless, the recent negative price movement of tech stocks — and software shares in particular — matters.
Why? Because we are not only seeing software stocks flirt with bear-market territory in technical terms, but also a pretty notable pullback in the value of even the fastest-growing technology companies. This means that public valuation multiples — key indicators for yet-private unicorns and younger startups — are shrinking.
After reaching a 52-week high of $65.51 last month, the market value of the basket of software companies slipped to $53.00 as of this morning. That’s a decline of 19.1%, or 90 basis points under the 20% required for a particular asset, or asset collection, to reach technical bear-market territory.
We’re close, in other words.