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