Graphic: Blockchain name-grabbing has echoes of dotcom bubble
08/02/2018 10:14
By Alasdair Pal
LONDON, Feb 8 (Reuters) - If you want a quick boost to your
company's share price, adding "blockchain" to your name will
work - at least for a while.
Despite a slump in cryptocurrencies that has wiped more than
50 percent off the value of bitcoin since December, the majority
of companies that have jumped on the blockchain bandwagon -
often from entirely unrelated industries with little or no
connected revenue - are still sitting on sizeable gains.
The average share price of such companies has risen more
than threefold since such name changes, according to Reuters
data, with experts comparing the practice to a similar rush
during the dotcom bubble.
Most recently shares in Stapleton Capital BLOC.L , a UK
shell company yet to report any revenues, doubled on Jan. 22
after it changed its name to Blockchain Worldwide. urn:newsml:reuters.com:*:nFWN1PH03W
The rally has come despite regulators across the globe
taking a closer look at recent company converts to the
blockchain name.
U.S. regulators suspended the shares of UBI Blockchain
UBIA.PK on Jan. 11 after finding evidence of "unexplained"
market activity, while Israel-based Blockchain Mining NRH.TA
is plotting an alternative listing after regulators said they
planned to ban companies involved in cryptocurrencies in the
country. urn:newsml:reuters.com:*:nL8N1PP38D
Both stocks had rallied dramatically since changing their
name - more than 1,000 percent in the case of UBI Blockchain -
but have since erased almost all their gains.
"It reflects that (blockchain is) a big bubble," said Huy
Nguyen Trieu, an associate fellow in fintech at the Oxford Said
Business School, on the spate of company rebrands.
"During the dot-com boom, France Telecom changed its name to
France Tele.com, and because of that its share price exploded."
Bitcoin's 40 percent slump this year has been driven partly
by growing expectations of a regulatory crackdown on
cryptocurrencies. Blockchain is the technology that underpins
them, but can have many other business applications as a ledger
for recording transactions.
"Crypto is a bubble in the sense that there are a lot of
people wanting to buy the asset, but blockchain also in terms of
the huge amounts on investment - a lot of that won't have
short-term economic returns," said Nguyen Trieu.
France Telecom, since rebranded as Orange, wasn't the only
company to benefit from the market's enthusiasm for all things
tech at the turn of the century.
In December 2001, a study by academics at Purdue University
found that the 95 companies that added ".com", ".net" or
"internet" to their names saw their share price increase by 74
percent in the 10 days surrounding the announcement day.
And if the current crypto-crash continues, companies have
one more name-change trick available.
A study by the University of Illinois in 2002 found that
when many of the same companies changed their names again after
the bubble burst to remove traces of their dotcom past, their
shares rallied by a similar amount.
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Blockchain graphic http://reut.rs/2sfRNz1
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(Reporting by Alasdair Pal; Additional reporting by Jemima
Kelly; Editing by Tom Pfeiffer and Hugh Lawson)
((Alasdair.Pal@thomsonreuters.com; +442075428075; Reuters
Messaging: alasdair.pal.reuters.com@reuters.net))
Keywords: BLOCKCHAIN COMPANIES/