Want a Hot Stock? Pick a Cool Name--So Goes the Theory
Blue Martini, FirePond, Busybox--they sound more like the latest Hollywood night clubs than publicly traded companies.
But in today’s tough climate for initial public offerings, companies trying to differentiate themselves from the crowded Internet pack are continuing to adopt unusual names. They hope to attract Wall Street interest and build that all-important brand image, in the mold of Yahoo, but of course, it often doesn’t work out that way.
“It’s another example of Internet companies spending more time on marketing and hype than on building a solid business,” said Christine Spivey Overby, Internet analyst with Forrester Research in Cambridge, Mass.
Overby acknowledges, however, that unusual names can be helpful initially. She said Blue Martini’s “cool” name helped the Internet software company get a “nice splash in the market” with a big first trading day, but she believes hip labels don’t mean much in the long term. Still, San Mateo, Calif.-based Blue Martini Software (ticker symbol: BLUE), which rose 174% in its July debut, is now up more than threefold from the offer price of $20 a share.
“There’s no correlation between a cool name and any long-term viability,” she said. “Nothing past a couple cute media stories and a few jokes that arise.”
Perhaps surprisingly, Bill Evans, a vice president of marketing at Blue Martini who helped approve the name when the company was formed in spring 1998, believes the moniker had no impact on the IPO.
“We certainly didn’t choose the name so it would help with our funding activities,” he said. “The goal was to have a distinctive name that could help us build a brand. The martini, there’s a certain elegance to it. It’s a high-end drink for connoisseurs. That’s an image we wanted for our software.”
But others feel differently about the impact of their names.
The name Busybox.com (BUSY) “absolutely” helped attract initial interest, said Catherine Michela, head of investor relations for the Century City-based digital media company. The stock went public June 27 at $5 a share on Nasdaq and closed 11% higher the first day, although it is now down more than 40% from the offer price.
Investment bankers who took the Internet software company public and Wall Street analysts alike praised the name--which comes from a children’s toy called Busybox--as something investors could remember, Michela noted. She also sees it as a brand with lasting impact.
“We’re not some boring company,” she said. “Our name is a delightful mix of what we do and highlights our creativity.”
Other recent IPOs with unusual names include FirePond (FIRE), a Waltham, Mass.-based provider of e-business sales and marketing software.
The oddball-name trend, say analysts, is partly the result of today’s younger management teams, such as those that founded Santa Clara, Calif.-based Yahoo (YHOO). In the mid-’90s that name, which the company presents with an exclamation point attached, was considered a liability by some gray-suited Wall Street bankers.
That’s all changed of course, as the stock remains way up from its 1996 offering price despite slumping this year, and Yahoo has become one of the world’s most recognizable brands.
Analysts say that trying to pick a cool name can backfire, however.
Consider Snowball.com (SNOW), a San Francisco-based Internet content company that went public at $11 a share on March 21 and rallied strongly on its first day.
“But what does a snowball do? It goes down. That’s what’s happened here,” quipped David Menlow, president of IPOFinancial.com, a New Jersey data service.
Snowball.com--whose founders surely had a more positive meaning in mind--is now trading at less than $3. Of course, it could be a case of bad timing rather than bad naming: The IPO came out near the peak of the Nasdaq market.
In any event, a cool name is never a guarantee of a hot stock. Among the cute-sounding IPOs now trading below their offer prices are Fogdog (FOGD), Zany Brainy (ZANY) and FirePond.
Another danger in the fast-moving Internet space is naming a firm for a technology that may become obsolete--or an industry that suddenly falls out of favor on Wall Street.
Indeed, many companies are rushing to erase the “dot-com” at the end of their names, as those stocks, which sizzled last year, have turned icy.
MP3.com (MPPP) of San Diego is an example of a company whose name could easily get eclipsed by technology, according to Internet analyst Tom Taulli.
“What happens when there is MP4 and MP10?” he asked.
Taulli said he likes clever names--if they are relevant to a company’s business. He pointed to Nuance Communications (NUAN) of Menlo Park, Calif., which has seen its stock rocket nearly 800% since it went public April 12, one of the year’s best performers so far.
“One of the problems with voice recognition technology is nuances, recognizing those differences--so [the name] tells investors something,” he said.
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Times wire services were used in compiling this report. Remember that initial public offerings are highly speculative and not suitable for all investors. Debora Vrana, who covers investment banking and the securities industry for The Times, can be reached at debora.vrana@latimes.com or Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.
