>From NEW YORK OBSERVER
The New New Strategy: Do Nothing and Do It Well
by Michael Lewis
(BLOOMBERG NEWS)—The Internet boom has transformed the idea of the company. A company used to be a group of people who organized themselves for fairly well-defined tasks. But these days the U.S. stock market indulges a new, looser definition. A company is now a group of people who raise capital to do whatever they want to do.
The reason usually given for the new tendency of companies to morph overnight is that they operate in a fast-changing environment. A company should not be expected to predict what it is going to be doing in six months because six months suddenly feels like a lifetime.
That may be true. But it is also true that once an Internet company is considered established, or committed to a line of attack, it loses its allure. It leaves itself open to the sort of hard analysis Internet companies strive to avoid. To be desirable, an Internet company must be slightly unknowable. It must remain forever in a state of pure possibility.
A Bloomberg user recently pointed out what must be one of the purest examples of pure possibility, an Internet company called NetJ.com Corporation. NetJ.com is smaller than most of its Internet cousins. It has a market capitalization of a mere $22.9 million. Still, its stock price has soared—up seven-fold to $3.50—since the middle of last year. Six months ago it offered a 5-for-1 stock split.
The only hint that NetJ.com is in any way different from most Internet companies is Bloomberg’s description of it: NetJ.com currently has no business operations.
Assuming that the Bloomberg machine was mistaken, I went to the documents filed by NetJ.com with the Securities and Exchange Commission. There I found the following confession: "The company is not currently engaged in any substantial business activity and has no plans to engage in any such activity in the foreseeable future."
Translated into English: We do nothing and we intend to continue to do nothing.
This in itself is unremarkable. Many people do nothing and intend to continue doing so. What distinguishes NetJ.com is the spirit in which it does nothing, which is astonishingly similar to the spirit of many new companies widely viewed as successful.
NetJ.com began life as NetBanx.com, which hoped to collect bad debts for doctors. That didn’t work out. So the company gave up, and went into another line of work: searching to acquire or merge with another company that actually does something. For this it claims to be well suited.
You might wonder why a company that actually does something would care to merge with one that does nothing, even if it has a gift for doing nothing. You are naïve. The mere fact that NetJ.com is a public company, with a share price that goes up and down every day, apparently makes it potentially desirable to a private company that wants to avoid the hassle and the wait involved in going public. NetJ.com offers itself as a kind of bandwagon, albeit one without wheels.
Such an approach to business would have been risible just a few years ago. Maybe it is even now. Still, it is hard to say what distinguishes NetJ.com from most Internet companies. A lot of putatively successful Internet companies raise capital first on the pretext of creating one kind of business, only to deploy it in the creation of another. Netscape Communications Corporation invented this approach, pretty much by accident. (Microsoft Corporation took away its original business.) Others now do it more deliberately. The trick, as one prominent Internet chief executive told me, is to keep yourself new. You have to present the stock market with a face lift every three months.
That is the beauty of NetJ.com. By doing nothing, it has avoided ruling out the possibility of not doing something else. As the company explains in an S.E.C. filing, "The company does not intend to restrict its search [for a partner] to any particular business or industry." Its list of possible ventures includes, but is not limited to, "high tech, natural resources, manufacturing, R&D, communications, transportation, insurance, brokerage, finance and all medical related industries." Not even Amazon.com Inc. leaves itself open to so many different opportunities.
Of course there are risks here. Some of them are stated pretty clearly in NetJ.com’s filings with the S.E.C. The company has $127,631 in accumulated losses—tiny by Internet standards. It has "extremely limited assets" and "no source of revenue."
But the most telling passage of the risk-disclosures section in NetJ.com’s confessional is the one that describes, incredibly, the danger of competition. You might think a company that does nothing, and which is looking to merge with a company that does something, would have the field to itself. But no! As the filing explains, "Management believes that there are literally thousands of ‘blank check’ companies, many of which have substantially greater financial and management resources."
Indeed, there are.