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 also falls into this category. Nobody expects passion, truth or laughs, and they rarely get them either.
Like 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 has 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 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 three million pounds ($4.4 million) on London's AIM market, and its shares went above 13 pence (they are now 3.5p).
Maybe on some other planet the company would have been brilliantly successful, but not on 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," he writes.
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 continues.
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 firm that can't work a website. Yes, that would be frustrating. Still, at least there might be some clients out there, even if they are having trouble logging on?
His lordship again: "Streetnames' competitors have continued to offer free e-mail services despite their mounting losses and this has severely detracted from our ability to attract customers."
The customer prefers the hundreds of free e-mail services, rather than paying Streetnames a fee to rent their own names at their own addresses? Amazing.
Companies that are unencumbered by revenue and customers are now a common sight on the London stock market. Take the oddly named PrintPotato.com Plc. Strangely, this is not the place to go for prints, or engravings, of your favourite potatoes, or indeed any other vegetable, 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? 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.
In a trading statement issued in February, Hargrave said: "It has recently become clear that while PrintPotato has succeeded in establishing one of the UK's premier online print centres, the current low level of online sales is increasing too slowly to support the company in the long term."
With engaging honesty, Hargrave goes on to say there is no point wasting any more 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.
Likewise, with Musicunsigned Holdings Plc, which like PrintPotato was bought to the market by the London broker Seymour Pierce. It raised £3.2m through an Aim float last September. The idea was to put demo recordings the rough tapes wannabe pop stars send to record companies onto a website and make money out of doing that somehow or other.
Until this month, that is. A strategic review of the company resolved that it might as well stop wasting time in the office and go bowling or take up crochet instead. There was a reason those demos weren't bought by EMI Plc or Sony they weren't any good.
"It has become apparent to the board of the company that its business model is likely to require more funds than it is prudent to spend because, although the company has been generating revenues, they have fallen well below its original forecasts," writes chairman Chris Roberts. "As a consequence, the board has decided to close down the company's operations with immediate effect and conserve the company's remaining cash." It too has decided that the business it set out to build was a waste of time and the only option it has left is to use its remaining money to buy a real company with sales and customers instead.
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 is better to move on. It would be better, however, if they shut themselves down and returned the money to their shareholders. What better way of saying sorry, after all, than making a dignified and speedy departure?
Matthew Lynn via the London Bloomberg newsroom
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