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| Topic: Is eToys stock suffering from an etoy boycott? |
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Date: Sun, 12 Dec 1999 15:59:09 -0500 From: t byfield <tbyfield@panix.com> To: Nettime <nettime-l@bbs.thing.net> Cc: Declan McCullagh <declan@well.com> Subject: Re: <nettime> TBTF: eToys pays in market cap for bullying etoy 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 lawsuit 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, given 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 important. 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 retail 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 ratings 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 circumstances, it seems a little bit silly to demand 'extraordinary 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 measure 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 necessarily 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 saying '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 legendary 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 | |||||
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> 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. It takes time for the story to percolate outwards from its first posting (the Slashdot discussion wasn't until December 3), and for word-of-mouth to get started. If anything 24 hours seems fast for these proceses to build momentum. | |||||
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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. | |||||
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> I'm not condoning what they did to etoy, but I strongly > suspect you're engaging in wishful thinking here. No, I'm just extrapolating from the regular comments of people and organizations with whom I interact. Their _extreme_ displeasure about how some companies do business strongly influences their actions, both as consumers and as investors. Sorry, but I don't 'wish' one way or the other :-> | |||||
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With all due respect... I think you guys are nuts. As parents of a two-year old, we have a lot of contact with other families who buy toys, and they know nothing about domain names, etc. We're talking non-technical here: we get floods of email with fake virus warnings, Bill Gates will pay you to forward this message, etc. They buy from e-toys because it's a nicely laid-out site, and the prices are decent. A glance at the Yahoo chat board for etoys will confirm that on-line traders don't care much about domain names, either. There are a large number of shares outstanding, and I doubt many of the holders know or care about etoy. Many successful companies do much worse things all the time. It seems that the stock is going down because of the amount and success of its competition. The fact that Toys R Us, a truly awful 'real' store, is doing very well this season is a surprise to many people, including myself: As soon I heard on the radio that they beat out etoys on Thanksgiving weekend, I knew this was significant, toy-wise. One never really knows why a stock goes up or down, but I think this is closer to the truth. (And, in fact, etoys is still well above its August low). I'm not condoning what they did to etoy, but I strongly suspect you're engaging in wishful thinking here. | |||||
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There is a sense that "everybody" is getting in on the e-market. I think not. NASDAQ and IPO activity is most influenced by folks who've been in technology for a while. That is, e-markets are most affected by feelings / expectations of the slightly-to-extremely geeky. They're the folks with discernment, first-hand tech-knowledgey -- and they get those "friends and family" IPO buy-in offers. That crowd is most likely to be upset by eToys' approach. So, they (and the folks they frisbee golf, ski, or i-game with) are voting with their feet. | |||||
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In a TBTF Log item (http://tbtf.com/blog/1999-12-05.html#5) I note the anomalous dropoff in the value of eToys stock (NASD: ETYS) and wonder whether it is due in part to a backlash against the company's bullying of the artist group etoy. Some of the TBTF Irregulars have posted conflicting opinion on the question (sample above), and Declan McCullagh has poured scorn on the idea on his mailing list. What's your view? |
