Today's humor: "The Internet's Blank-Check Business Model: Michael Lewis the author of ``Liar's Poker' and ``The New
New Thing,' New York, Jan. 25 (Bloomberg) -- An interesting aspect of
the Internet boom is the way it has transformed the idea of the
company. A company used to be a group of people who organized
themselves for fairly well-defined tasks. The U.S. stock market
now indulges a new, looser definition. A company is now a group
of people who raise capital to do whatever they want to do.
The biggest and most respectable new companies, such as
Amazon.com, routinely surprise investors with some new activity
they intend to spend money learning how to do. If you asked an
investor in any of several hundred Internet companies what,
exactly, his company would be doing or claim to be doing six
months from today, he would say, if he were feeling honest, ``I
have no idea.'
The reason usually given for the new tendency of companies
to morph overnight is that they operate in a fast-changing
environment. A company should not be expected to predict what it
is going to be doing in six months because six months suddenly
feels like a lifetime. Who can predict what the world is going to
look like in six months?
This may be true. But it is also true that once an Internet
company is considered established, or committed to a line of
attack, it loses its allure. It leaves itself open to the sort of
hard analysis Internet companies strive to avoid. To be desirable
an Internet company must be ever so slightly unknowable. It must
remain forever in a state of pure possibility.
A Bloomberg user recently pointed out what must be one of
the purest examples of pure possibility, an Internet company
called NetJ.com Corp. NetJ.com is smaller than most of its
Internet cousins. It has a market capitalization of a mere $22.9
million. Still, its stock price has soared -- up seven-fold to
$3.50 -- since the middle of last year. Six months ago it offered
a five-for-one stock split.
`No Plans'
The only hint that NetJ.com is in any way different from the
general run of Internet companies is Bloomberg's description of
it: NetJ.com currently has no business operations.
This raises an obvious question: how can a business worth
$22 million have no business operations? Assuming that the
Bloomberg machine must be mistaken I went to the documents filed
by NetJ.com with the Securities and Exchange Commission. There I
found the following confession:
``The company is not currently engaged in any substantial
business activity and has no plans to engage in any such activity
in the foreseeable future.'
That sentence is a nice example of businessspeak gussying up
a simple fact. Translated into English: We do nothing and we
intend to continue to do nothing.
This in itself is unremarkable. Many people do nothing and
intend to continue doing so. What distinguishes NetJ.com is the
spirit in which it does nothing, which is astonishingly similar
to the spirit of many new companies widely viewed as successful.
NetJ.com began life as NetBanx.com, which hoped to collect
bad debts for doctors. That didn't work out. So the company gave
up, and went into another line of work: searching to acquire or
merge with another company that actually does something. For this
it claims to be well-suited: ``Management generally, and Mr.
Stifford (the founder) in particular, has substantial experience
and expertise with analyzing prospective business endeavors.'
Keeping New
You might wonder why a company that actually does something
would care to merge with one that does nothing, even if it has a
gift for doing nothing. You are naive. The mere fact that
NetJ.com is a public company, with a share price that goes up and
down every day, apparently makes it potentially desirable to a
private company that wants to avoid the hassle and the wait
involved in going public. NetJ.com offers itself as a kind of
bandwagon, albeit one without wheels.
Such an approach to business would have been risible just a
few years ago. Maybe it is even now. Still, it is hard to say
what distinguishes NetJ.com from most Internet companies.
Certainly not its business model -- the investment bankers' term
for the widespread practice among Internet companies of making it
up as they go along.
A lot of putatively successful Internet companies raise
capital first on the pretext of creating one kind of business,
only to deploy it in the creation of another. Netscape invented
this approach, pretty much by accident. (Microsoft took away its
original business.) Others now do it more deliberately. The
trick, as one prominent Internet CEO told me, is to keep yourself
new. You have to present the stock market with a face-lift every
three months.
Competition
That is the beauty of NetJ.com. By doing nothing it has
avoided ruling out the possibility of not doing something else.
As the company explains in an SEC filing, ``The company does not
intend to restrict its search (for a partner) to any particular
business or industry.' Its list of possible ventures includes,
but is not limited to, ``high tech, natural resources,
manufacturing, r&d, communications, transportation, insurance,
brokerage, finance, and all medical related industries.' Not
even Amazon.com leaves itself open to so many different
opportunities.
Of course there are risks here. Some of them are stated
pretty clearly in NetJ.com's filings with the SEC. The company
has $127,631 in accumulated losses -- tiny by Internet standards.
It has ``extremely limited assets' and ``no source of revenue.'
In fact, it has so little money on hand that if it wanted to do
anything, such as file to sell more shares in itself, it would
need to ask its management consultants to advance the money.
But that is not the telling passage of the risk-disclosures
section in NetJ.com's confessional. The telling passage is the
one that describes, incredibly, the danger of competition. You
might think a company that does nothing, and which is looking to
merge with a company that does something, would have the field to
itself. But no! As the filing explains, ``Management believes
that there are literally thousands of `blank check' companies,
many of which have substantially greater financial and management
resources.'
Indeed, there are. |
