What's In a Name? Crypto Edition
I wrote some time ago about how much names matter when it comes to investing. Someone asked me recently how I came up with my firm name. It was quite a bit of brainstorming and I was initially going to go with Forward Looking as it is also a financial term. However, after much consideration I switched it over to Forward Thinking. Well, based on the latest trends in renaming companies I may have to update my name.
Let’s go back to the beginning. I mentioned in the original email how research has been done to show that fund names with more “gravitas” have higher fund inflows than their lesser named competitors. Of course, it has nothing to do with performance as the findings revealed some interesting facts. These “gravitas” funds had lower overall performance, higher volatility, and other negative measurements. And at the end of the day these funds showed a higher rate of fund extinction, or closure. But, hey, investors like cool names!
We all remember the internet boom of the late 90s. The joke was you just needed to add .com to your company name and your stock price would explode. Sadly it is not far from the truth. In 1999, the company called Computer Literacy, Inc changed its name to fatbrain.com. Guess what happened to its stock? It shot up 33% in a single day! From 1998 through 1999 there was a group of stocks within the technology industry that outperformed the industry as a whole. These stocks all had .com, .net, or Internet in their name. As a group their outperformance was 63% during this short two-year period. Unfortunately, while these stocks had a great run up, their run down was incredibly fast. Fatbrain.com no longer exists as an individual company. Many of the .com stocks of the late 90’s saw drops of over 90% in their stock prices as well.
Similar trends are happening now in the crypto world. There are two great examples recently. First, let’s visit the more recent one as it is a company everyone knows – Kodak. Kodak is a 130-year old company. At one point Kodak was considered a cutting-edge company. The last few months it has been a penny stock with its stock price less than $5 a share. Earlier this week (I am writing this on the 10th) Kodak was trading at $3.05 a share. Since that time they have announced they will be developing their own cryptocurrency named KodakCoin. This coin will be used on KodakOne, their new photo rights and royalties tracking product built on Blockchain. Since their announcement their stock has quadrupled to a high of over $13 a share, although now it has settled down a bit to $10.70 a share.
The other example is a bit stranger. Long Island Ice Tea company announced last month they would be changing their name to Long Island Blockchain. Their stock increased over 400% (it is now only up 200%) and prevented it from being delisted from NASDAQ. I guess part of their plan is to get into bitcoin mining. I really don’t want to know why they felt the need to move from ice tea to bitcoin mining, but so be it.
There are a variety of other examples with their new names and their initial spikes, such as Bioptix to Riot Blockchain (+375%), SkyPeople Fruit Juice to Future FinTech Group (530%), and Longfin (2,400%). I haven’t delved into the backgrounds of these companies, however, I am rather confident their fundamentals don’t justify triple digit increase overnight.
Again, be careful when selecting investments based on names. However, if you want to take your company public and get a quick runup in stock price before you dump it, feel free to add blockchain, fin, tech, or coin to it. I’m sure no investigators or attorneys will have anything to say. (please note this is all in my special sarcasm font). Signing off from here at Forward BlockFinChainTechCoin Wealth Management, LLC.