Here's some cheering news. Individual investors aren't the only ones who, as the


scaled unsustainable peaks, were foolish enough to buy into start-ups whose shares are now selling at a huge discount to their initial public offering price. Plenty of corporate investors, apparently consumers of their own Kool-Aid, also have been skinned by investments in young companies at what now look like ridiculous valuations.

The carnage -- even after Tuesday's snapback in Nasdaq stocks -- has affected some of the corporate and investment world's biggest players, including

Goldman Sachs

(GS) - Get Report


Dell Computer

(DELL) - Get Report


America Online


. What's noteworthy about all this is the level at which corporate investors began playing the IPO game as the tech-stock bull market raged. Once upon a time, corporations might have made strategic investments in private companies to anticipate long-term needs for new technology or market access.

But with IPOs viewed as easy money, everyone with muscle clamored to get in. And the presence of the big shots helped perpetuate the game, soothing public skepticism about some of the diciest deals. Now the biggies are suffering, too.

Take Goldman Sachs, which bought $100 million worth of shares in online grocer



in July at $12.69 per share. Goldman was the lead underwriter of Webvan's November IPO at 15. Even after a 21% jump Tuesday, Webvan's shares were down with the dented cans, at 6 3/16. Goldman's less-than-1-year-old investment is $51 million underwater.

"In the last six months, I don't think you could ever call buying into the IPO round 'investing,' " says Randy Komisar, an independent adviser to start-ups and a board member of newly public TV service operator


(TIVO) - Get Report

. (TiVo's shares recently have flirted with their initial offering price of 16 and closed Tuesday at 17 15/16, up 13%.) "We saw a frothy market where people had to put money to work," says Komisar, by way of explaining some of the behavior of investors. "More, there are certain inflection points in the market where you just go with it."

Translation: Blue-chip investors and corporations aren't immune from the greed that affects everyone else.

Perfect example:



, America Online and


(NOK) - Get Report

bought a total of 5.9 million shares in the IPO of hand-held-computer maker



, despite the precipitous rise in the valuation of the



subsidiary in the weeks before its IPO.

Motorola and Nokia at least should have known better. They actually are wireless companies, which is how Palm positioned itself for the sake of the market. The corporations clearly believed Palm's positive press: They bought their shares at 38. Today they trade for 29 1/8.

Of course, these aren't short-term investments, and in most cases, corporate buyers that were allowed to buy in at the IPO have lockup restrictions that keep them from selling their shares quickly. But if the shares remain down, the corporations will have to record the depressed value of their investments on their balance sheets at the lower number.

Dell also has felt the pain as an IPO investor in Internet poster child


. According to's filings with the

Securities and Exchange Commission

, the health care Web site in Austin, Texas, reserved shares worth up to $10 million for its neighbor, Dell. The company sold shares to the public in June at 9. The shares peaked last summer at 45 3/4 and closed Tuesday at 2 11/32.

What's the moral of the story? Everyone, from individual investors to investment bankers to the companies issuing shares, got carried away in the great IPO boom of 1999. (It's worth noting, to save some of you the trouble of writing, that

News Corp.

(NWS) - Get Report

invested in the IPO of


at 19; those shares closed Tuesday at 6 1/4).

We'll know there's a return to quality when investors large and small stop gunning for IPO candy and begin investing in the fundamentals. Recent volatility suggests it's too soon to say if that time has come.

Making Chicken Salad From...

And then there's the right way to invest in broken companies: with pre-IPO-like warrants at rock-bottom prices.

Charles Schwab


has done pretty well for itself in the span of one business day with its investment, announced Tuesday, in online mortgage broker




Schwab, king of the discount stock brokerages, also agreed to jointly market online mortgages with E-Loan, whose stock price had withered along with the mortgage-refinancing business. Schwab is investing $10 million in E-Loan at $3.75 per share, an 8% discount to Monday's closing price of 4 1/16.

Four other investors, including original backer

Benchmark Capital

, are investing another $30 million in E-Loan. In connection with its marketing deal, Schwab gets warrants to buy 13.1 million shares of E-Loan stock at $3.75 apiece and another 6.6 million shares at $15. If Schwab exercised all its warrants and E-Loan's share count didn't otherwise change, Schwab would own about 24% of E-Loan.

"There's a shakeout going on among winners and losers," says E-Loan President Joe Kennedy. "This is one of the milestones that separates the two."

Notably absent from the private placement was


, which actually is under water on part of its investment in E-Loan, having bought pre-IPO shares at a price greater than the company's IPO price. Kennedy says Softbank remains "fully supportive" of E-Loan and is an investor in its overseas ventures.

E-Loan's shares more than doubled Tuesday, closing at 9 11/32.

Adam Lashinsky's column appears Tuesdays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at