With AI added to the name, market cap 2soared by multiple times... the true face of U.S. small-cap stocks cut in half
2023since at least 27U.S.-listed companies have added AI to their names or changed their business direction. The combined market capitalization of the companies that changed their names rose by 87billion dollars (106%) at the peak, but as of last month more than half of those gains had disappeared, and the market capitalization of 7companies had fallen below their levels before the change.
It is an era in which just adding the two letters 'AI' to a company name sends the stock price higher. Even when the business results have not changed. Based on vivid examples from the U.S. market, we look at how investors' money has been blown away by this almost magical phenomenon.
2023since at least 27U.S.-listed companies added AI to their names or reshaped their businesses around AI. Simply by changing their names, the combined market capitalization of these companies increased by as much as 87billion dollars at the peak. Compared with before the changes, that is a jump of 106%.
The problem is that the effect does not last long.
As of last month, more than half of the gains had evaporated. 7The market capitalization of several companies has actually fallen below what it was before they changed their names. Allbirds is a prime example. Last month, it shifted its business from selling sneakers to high-end servers equipped with AI chips and changed its name to Smartbird. It is a pattern in which the stock price soared on market expectations, then plunged once it became clear there was no substance behind it.
The true face of most companies that took part in name changes, including Noterminus, is unexpectedly modest. Many remained over-the-counter listings or microcaps, and some were even struggling with poor business performance and management difficulties. It is a classic case of so-called 'name-based marketing' unsupported by results.
- Stimulating expectations: As the influence of individual investors has grown, companies have increasingly pursued patterns aimed at short-term stock-price effects. That was pointed out by Owen Lamont, portfolio manager at Acadian Asset Management.
- History repeats itself: The method of inflating corporate value through a name change is not unfamiliar. 1990In the late days of the dot-com bubble, companies that added '.com' to their names also saw their stock prices rise after announcements, 10and there is research showing they recorded an average excess return of 72in a single day. The same thing happened during the cryptocurrency boom.
A stock price that rises on name value alone eventually returns to where it started. 27The poor half-and-half traces of several companies prove it. Before being swayed by a name, there is reason to first check the money the business actually earns.
Sources: 뉴시스 경제
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