As you might know, green is the colour of stocks moving on the plus side on the My Yahoo stock monitor toolbar. For three weeks, they’ve all been red. This morning, like Spring’s resurrection, they’ve all gone green. Yesterday, the NASDAQ’s biggest ever single day point gain breathed some life into a skittish market, and bargain hunters are reaping the rewards all over the place. Cisco will probably close today $15 up from yesterday’s open.
I think we’re entering a brave new world in Internet economics. I think that in this new world, the bullshit metrics which have driven .COM valuations have been cast aside in favour of more rational yardsticks. How many subscribers you have to your web site just plain won’t matter if you don’t know how to make money from (“monetize” — buzzword alert!) them. How many grocery vans you have on the road will not matter so much as whether or not you’re able to pay the monthly lease costs on each of them.
According to my (again, rudimentary) research, IPOs for .COMs with no revenue or with steep losses for very little revenue are no longer in vogue, and they can’t sell the long-term play anymore. “CoolSavings.com” (ever been there? no?) announced they’re delaying their IPO today. No shit. They suck!
Yes, in this new world, we’ll all have to become responsible corporate citizens. All of us 20something execs with zero experience running real businesses will have to go out, get a Brooks Brothers suit, and start talking like #%@$ing bankers. Say it ain’t so! Don’t make me do it! There’s got to be another way!?
Behold a new chic technique — revenue! Pre-IPO entities will now orchestrate wildly creative arabesques in order to push money thru the balance sheets. For the interim though, it will still not matter in the least how much a company loses. Dropping $20Million to make $5Million will be much better than dropping $4Million to make $1Million. The ratio is the same, but the point is the market will put blinders on as to how much a .COM spent and focus on how much money they collected. In the old days investors threw away both figures, so I guess from an economic perspective this represents improvement.
So, behold the new bullshit metric of the information economy: Carrying Capacity! How much money can your .COM transact? Quick! Get some serious revenue on the books before the IPO!
We’re still not doing the trailer park investment public any favours (whom do you think paid for this recent decline?) but at least we’re finding a way to preserve the hallucination. The Dot Commies will always refuse to believe in the possibility that maybe the NASDAQ just isn’t supposed to be at 5000.
Anyway, this and next week will be a boom time for those non-trailer-park dwellers (a trailer with a pad in Silicon Valley is still worth $750K) who were able to protect themselves from the last three weeks.
There are some plum picks out there both on the NASDAQ and the NYSE — that’s right, the NYSE. Not only were .COMs hammered in the last three weeks, creating hella bargains, but REAL companies with REAL P/E ratios have been slammed for three years now. Time to jump in.
-Ian.