Comment Articles

City finance, and stockbroker madness

Guy Kewney AnchorDesk

Published: 19 Jan 2001 17:18 GMT

The reason is City finance, and stockbroker madness.

A year ago, you may remember, some of us were standing at the back of the room trying to make ourselves heard over the sound of a stockbroker stampede. We were shouting: "Those dot-com shares are not worth jack!"

Inevitably, twelve months on, people who honestly believed that FreeServe was worth more than British Airways (because that's what they paid for the shares!) now are refusing to touch any solid, reliable e-business, simply because it is tarred with the dot-com brush.

How does this affect your ISP? Easy; most of the UK's internet suppliers are tiny, tiny outfits. When they started up, they looked like good, solid investments; the City was falling over those guys trying to get them to accept money. And they spent it.

And they will regret doing that. Actually, most of us are going to regret that. We, as a country, have not just been watching those people get their dot-com millions; we've been queueing up to sell them things. For example, how many times did you see the letsbuyit four-legged ants on TV, telling you how much money you could save? Do you actually know how much it costs to buy that amount of TV advertising time?

And the same applies to whatever your employer sells. While the dot-com millionaires bought cars and property and furniture and computers and advertising and travel, we sold it to them.

Well, those days are over. The Nasdaq -- the American stock exchange for tech stocks -- has started writing to some of its members, suggesting that they aren't suitably dressed for the party. We've had five years (rather more, in fact) of solid growth in tech stocks; the Nasdaq has been pretty much pretending it was all due to the sheer wonder and glory of the Nasdaq. And there are now a lot of tech stocks languishing with valuations that wouldn't seem out of place in heavy manufacturing.

Since those low value stocks make the Nasdaq average look bad, the Nasdaq has asked them to get out. Does it matter if they are, in fact, good, sound businesses with real prospects of growth and revenue? Not one bit! -- as long as Wall Street and Hong Kong and Tokyo and the City of London see them as dot-com tainted, they can't raise investment capital.