Certain types of writing exist neither to entertain nor inform, but only to fill their allotted spac...
Certain types of writing exist neither to entertain nor inform, but only to fill their allotted space with minimum embarrassment and maximum decorum. Examples include opinion pieces by minor politicians, memoirs of sportsmen and bankers, the father of the bride's speech at a wedding, and leaders in the Financial Times.
The chairman's annual report to shareholders falls into that category. Nobody expects passion, truth or laughs, and they never get them either. As with the mothers of newborn babies, company chairman assume shareholders have delicate stomachs, likely to be upset if served anything other than the blandest of starch. They generally keep the spices and the red meats safely locked up in the cupboard.
Until now, that is. One of the stranger consequences of the new economy has been an outburst of honesty in company reports. A series of statements have recently been filed that would be better examined by a psychologist or a priest than by an accountant or a financial analyst. In the new economy, it seems there are new ways of saying sorry. Take Streetnames Plc, a British company that was set up amid the internet frenzy of last summer. Even allowing for the heady atmosphere of those days, its business plan seemed to lie somewhere between the optimistic and the demented. It bought the rights to domain names for cities, boroughs and London streets which it then planned to sell or rent to customers (so, you could have [email protected], or [email protected]). On the back of that idea, the company raised £3m on the Aim market, and its shares went above 13p, they are now around 3.5p.
Maybe on some other planet, the company would have been brilliantly successful, but not this one. The interim results filed by its chairman, Viscount William Waldorf Astor, read more like an existential howl of pain than a sober assessment of its prospects.
"At the time of the flotation it was hoped to launch the website in summer 2000," writes Lord Astor in his report to his shareholders. The next sentence starts with an ominous sounding 'however': "However, various technical issues resulted in a delay in the launch."
Oh no. Calamity. Still, since Streetnames is a web company, presumably it can get a website up and running? "The technical problems experienced prior to the launch of the website have continued after the launch," Astor wrote.
So the website doesn't work then? "One major issue that arose was that the system was not able to deal adequately with multiple applications," says Astor. "Despite our efforts we are not yet confident the system is functioning properly. This has created a frustrating situation."
A web company, that can't work a website. Yes, that would be frustrating. Still, at least, there might be some customers out there, even if they are having trouble logging on? His lordship again: "'Streetnames' competitors have continued to offer free email services despite their mounting losses and this has severely detracted from our ability to attract customers."
The customer prefers the hundreds of free email services, rather than paying Streetnames a fee to rent their own names at their own addresses? Amazing. Companies unencumbered by revenue and customers are a common sight on the London stock market. Take the oddly named PrintPotato.com. Strangely, this is not the place to go for prints (or engravings) of your favourite potatoes but rather an online printing business. When it raised £3.2m on the Aim market last year, chairman Stephen Hargrave described the company like this: "We are more a virtual supplier of real things than a real supplier of virtual things."
What might that mean? Dunno. Anyway, it doesn't appear to have worked. The real things it has supplied have been mostly losses, and the virtual things have been customers.
With engaging honesty - the PrintPotato team clearly know when their chips are fried Hargrave goes on to say there is no point wasting anymore money on such as disastrous idea. The rest of its cash will be spent looking to acquire a real company that actually has a business.
These are not so much the walking wounded of the new economy as its ghosts: like zombies, they are pitiful half-alive, half-dead creatures, condemned to stalk the dark regions of the planet forever, empty husks of cash in search of a business model.
The honesty of these companies is to be commended. After the dead horse's flesh has been flogged raw, it's better to move on. It would be better, however, if they shut themselves down, and returned the money to their shareholders. After all, what better way of saying sorry than making a dignified and speedy departure.
Matthew Lynn via the Bloomberg London
All-day event on 24 April
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