If you’re an investor relations officer for a company without the words ‘dot-com’ or ‘web’ in its name, you may feel like the kid on the hockey team secretly resenting the star player. You work hard, go to practice, stay up to watch all the NHL games and study the moves of the greats. But he has the flashy moves, the fancy stick-work that draws cheers even from your own mom at games. Back in the atom league he was still going the wrong way with his skates splayed out while you were practicing cross-cuts, but now, as pee-wees, he skips nimbly between the defensemen and scores hat-tricks off your passes while you get squashed into the boards. You’re stolid Bob Gainey who anchors down the team while mercurial Guy Lafleur hogs the limelight.
You may know, in your heart of hearts, that you’re the better player. You may even wish the high flier would crash and burn – get boos for missing a goal when he should have passed the puck. Chewed out by the coach. Exposed for what he is – all hype, no fundamentals.
Are we nearing that point for highflying internet stocks? If packs of bubblegum came with trading cards for public companies, the stats might cause some consternation in the schoolyard. Last summer the Financial Times reported that the market capitalization of Russia was then only three times that of Yahoo, which had annual sales of $70 mn. Barron’s last month noted that the entire US airline industry is valued at around $30 bn, less than Yahoo, and that AOL is fast approaching the market cap of the entire US transportation industry – airlines, railroads and truckers. A few months ago Amazon.com passed book chains Borders and Barnes & Noble in market cap. Since then it passed Sears Roebuck, and now has about twice that retailer’s market cap.
Look at Yahoo’s $4.6 bn deal for GeoCities, trading one possibly inflated stock for another. It’s like trading Monopoly money for more Monopoly money when everyone else is using pennies. But at least they’re real pennies.
The core role of IR is managing market expectations, and that works both ways: up or down. Microsoft may be getting drubbed in Washington, but you’ve got to hand it to the company’s IR executives. Every quarter they take care to quell the excitement and comprehensively point out future risks that affect its fundamentals.
Perhaps now would be a good time for other investor relations officers to step forward with a reality check. After all, as legendary fund manager John Neff wondered in Barron’s, ‘Where does all this silliness end?’
