The measure of success
What is the measure of a successful internet company? Some would say
vision — the ability to bravely present the future in a world struggling
with the present. Others would suggest flair — having a style that creates
rather than simply predicts the future. (I don't include “produce something
useful” because no internet company has ever been measured that way.)
Today there is a simpler measure: one US dollar. This is the “drop dead”
value that an internet company share needs to keep on the Nasdaq stock
exchange.
Nasdaq is a US exchange devoted to “high tech” companies. Although it
was around before the “dot com” revolution, over the past two years the
Nasdaq has been closely identified with the internet-linked dot coms.
Names of sites on the internet end in a top level domain extension.
These can be, for example, “.org” for organisation, “.mil” for the US military
and “.com” for companies. A dot com is a company whose internet name ends
in “.com”.
In 1997, well before the current internet economy crisis, Nasdaq introduced
a rule that if an individual share of a company was worth less than US$1
over a period of time then it was out.
Today, this is threatening many of the internet companies launched on
the stock market over the past five years. Nearly 100 Nasdaq companies
have seen their share prices collapse in the past few months. Given that
Nasdaq has more than 5000 companies listed this doesn't look like very
many. But it still does not boost the confidence of “investors” (the stock
exchange term for gamblers).
In these circumstances, Nasdaq has a major job to do. It cannot do anything
to lift the value of most of the shares themselves, because most of the
dot coms are inherently worthless. So instead it is working hard to fudge
its own $1 rule.
The time given to companies that count their value in cents rather than
dollars is four months, and several chances. While this may help Nasdaq
maintain a fiction of financial health, the results of individual companies
can hardly be ignored. For example, Beyond.com was launched as an e-commerce
service provider with the help of banking giant Credit Suisse First Boston.
Its share price started at $35; it is now valued at just 75 cents.
Nevertheless, for the past two years, November has marked the start
of a “bull run” (a rapid rise) for internet stocks, which then crash after
about six months. If this patterns holds true this year, we can expect
to see another wave of press enthusiasm for the internet economy over the
next few weeks. Just don't bet on it lasting.
BY GREG HARRIS
