<nettime> Re: TBTF: eToys pays in market cap for bullying etoy

[t byfield <tbyfield@panix.com>]

declan:

there's no doubt that the events you cite affected etoys' stock
price (that much seems clear); but the question remains whether
they're *adequate* explanations of the drop. i don't think that
has been proven, or even can be proven.

some remarks:

- the two forces (the financial reports you cite OT1H and bad
  press stemming from the etoys/etoy suit OT0H) aren't in any
  way mutually exclusive. we could argue about which had more
  impact, but that's a bit different from saying that the law-
  suit had no effect whatsoever.

- a 'market perform' rating from JPM may not be the best that
  etoys could potentially merit but plenty of dotcoms do just
  fine--absurdly so--with much less than that to go on.
  
- an insider selloff of a million shares isn't that much, giv-
  en that as of 31 oct etoys had issued 139,333,085 shares of
  common and preferred stock.

- the relative or absolute performance of its competitors has
  no necessary or mechanical effect on an ecommerce company's
  stock price. if it did, then amazon wouldn't be where it is 
  today, in light of barnes and noble's performance; the same
  could be said of dozens of ecommerce companies.

none of which proves anything one way or the other; these are
just issues that need to be taken into account in judging the
relative impact of the pro-etoy activism on etoys' financials.

there are other issues too, which i suspect are just as impor-
tant. if the market for dotcom stocks is hypersensitive, then
etoys' stock price had better be going up in the weeks before 
christmas--because, given how *intensely* seasonal the toy re-
tail market is, it'll have small reason to do anything but go
down when their revenues tank through may-june (sales tend to
pick up a bit then). the skyrocketing staock market is itself
a force to be reckoned with; i don't think a few negative rat-
ings from analysts is sufficient to explain why a stock would
deviate from the overall market thrust.

in any case, it's no secret that dotcom stock valuations have
run amok according to any traditional measures. under the cir-
cumstances, it seems a little bit silly to demand 'extraordin-
ary proof' *according to tradition criteria* from someone who 
argues that a dotcom stock is reacting to mechanisms we don't
fully understand yet. 

more specifically, someone else who was skeptical about keith 
dawson's claim pointed out that he had seen little or no talk
about the lawsuit or press on yahoo investor boards--surely a
place where tremors might be felt early, right? well, i'm not
so sure about that. various aspects of 'online' trading (from
the use of sites like datek and e-trade to chatting in forums
like that) are a subset of internet use in general--and there
are a *lot* of investors, particularly older people who won't
engage in these things but might be interested in buying toys
from an allegedly cheap e-commerce site (which, after all, is
a lot like buying from a catalog). so it isn't safe to assume
that reverberations from bad press will be felt in equal meas-
ure across the board or in any 'obvious' patterns. and please
remember that older people are major toy-buyers: they tend to
have a fairly high disposable income and lots of grandkids.

the same person objected that very few people understand much
about the politics of DNS, let alone have any strong feelings 
about it. again, a good point. but i don't think that's neces-
sarily important. let's say that a small fraction--say, 0.5%--
of the people who read jamie mccarthy's slashdot article sent
a letter off to prospective toy-buying friends and family say-
ing 'etoys is evil, don't buy from them and tell your friends
not to as well'... i don't know what slashdot's readership is,
but it isn't small or passive. the 'slashdot effect' is legen-
dary by now--do you really think the network effect of a note
like that would fizzle out without a trace? i don't think so--
and nor do i think that we'd necessarily see explicit mention
in the 'obvious' places.

again, none of this proves anything, and your doubts could be
on the money; but i wouldn't be in such a rush to dismiss the 
possibility that the bad press had an effect.

cheers,
t


declan@wired.com (Sat 12/11/99 at 01:11 AM -0500):

> I sent this to politech too...
> 
> ---
> 
> The attached article claims that etoys' (plural) stock dip this month was
> caused by "bullying" etoy (singular).
> 
> It is an interesting theory, and it might be nice if it were true. But it is
> not. Here's what happened this month that's actually relevant:
> 
> * JP Morgan started coverage of etoys with a mere "market perform" rating,
> saying it won't be the next amazon. JP Morgan analyst Tom Wyman set a price
> target of $50 in one year, essentially forecasting no increase.
> * etoys insiders said they were selling off a million shares
> * Media Metrix reported toysrus.com has surpassed etoys in weekly visitors
> * toysrus.com grew 355 percent from last year as opposed to etoys' 52 percent
> increase
> * toytime.com was the largest ecommerce gainer in any category, according to
> Media Metrix
> * Only one of 11 analysts following etoys stock rated it a "buy"
> 
> In fact, etoys' successful assault on etoy.com could have prevented
> shares from slipping lower. Investors might well have been encouraged by
> even a preliminary legal victory by etoys.  Second, even if you buy the
> theory that investors reacted to the news, why would they wait until 2
> December to price in a report that came out on 1 December? It sure
> doesn't take 24 hours for the market to react.
> 
> There is room for optimism in Internet activism. But extraordinary
> claims, such as the one below, require extraordinary proof. Correlation
> does not equal causation, and wishful thinking does not make it so.
> 
> -Declan

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