“Pivot” is a term regularly abused by entrepreneurs, as they cast wildly about for new ways to spend their investors’ money.
But the whiplash-inducing change of position announced by the Long Island Iced Tea Corporation this week will take some beating.
On December 13, the Hicksville-based company said it was “very excited” about a deal to distribute its soft drinks through a European healthy food and beverage group. On Thursday, it unexpectedly renamed itself Long Blockchain Corp, and said it was seeking opportunities in areas such as “digital cryptocurrency technology solutions for global financial markets”.
Investors sucked up the new strategy in a way that they never really swallowed the beverages Long Island peddles. The shares surged more than 500 per cent in pre-market trading on Nasdaq. “From Mother Nature’s top shelf,” as Long Island’s staid, tea-centric slogan puts it, straight to new technology’s hype machine.
During the first dotcom boom in 2000, I attended an editorial meeting in New York where the Financial Times’s commercial team told us, in all seriousness, that they had toyed with dropping the FT brand from FT.com, because of its old-economy taint.
One of the “opportunities” identified by the tea brewers of Hicksville is “a new smart contract platform for building decentralised applications that provides scalability beyond currently available options”. The speculative “company for carrying on an undertaking of great advantage, but nobody to know what it is”, identified by Charles Mackay in his account of the South Sea Bubble, could not have left the growth possibilities more thrillingly open.
Shape-shifting and name-changing have a long stock market history. The wily promoters in Anthony Trollope’s classic Victorian satire The Way We Live Now turn their California flour mill into a railway project, to take advantage of a market mania. “What has become of the mill?” asks one of the more innocent backers. “When there is such a thing as this on hand a trumpery mill like that is not worth speaking of,” points out his colleague.
More recently, a flirtation with glamour industries such as science, telecommunications or defence has been enough to buoy stocks.
Charles Geisst, in his history of Wall Street, points out that after the Russians put Sputnik into orbit in 1957, and President Eisenhower backed new research into weapons systems, “almost any company that made anything resembling rocket fuel . . . advanced in price”.
Technology was hot. Hewlett-Packard came to market two years later “without any earnings to speak of”, Geisst writes, while investors piled into “companies known for clever or new ideas”, called “concept stocks”.
A closer parallel with the blockchain stock mania — which a few weeks ago saw a biotech company, Bioptix, trade madly after renaming itself Riot Blockchain — is the first dotcom boom.
A 1999 academic paper concluded that adding a dotcom suffix led to abnormal returns. “A mere association with the internet seems enough to provide a firm with a large and permanent value increase,” the researchers concluded.
A surge in rebrandings and spin-offs affected even the least excitable organisations. At one point in 2000, I attended an editorial meeting in New York where the Financial Times’s commercial team told us, in all seriousness, that they had toyed with dropping the FT brand from FT.com, because of its old-economy taint.
Permanent value increases were not, it turned out, on offer to many. The Nasdaq peaked in March 2000 and within six weeks companies were shedding the dotcom suffix as fast as they had acquired it. (One very notable exception: Amazon.com.) FT research at the time suggested that shares in the 102 US internet companies with dotcom or dotnet in their names had fallen by more than 50 per cent by the end of April that year.
Long Blockchain Corp may of course avoid this fate. Its chief executive, Philip Thomas, says that having spotted this “once-in-a-generation opportunity”, he and his colleagues are “pursuing [their] new direction in a thoughtful and deliberate manner”.
Concept stock or not, Long Blockchain has not given up on the soft drinks business. “I want to assure our beverage industry customers, suppliers, and partners of our continuing support of the Long Island Iced Tea portfolio of beverages,” declared Mr Thomas. Given the intensity of the blockchain frenzy, he may need to tap into its benefits, including the promise that “every sip releases a sense of guilt-free escapism from your fast paced surroundings”.
The original Long Island Iced Tea cocktail is supposed to be a blend of gin, tequila, vodka and white rum, as well as lemon juice and Coke. “Most variants do not include any tea,” Wikipedia warns. If the corporation’s pivot succeeds, I’m guessing Long Blockchain won’t either.
