Let's say you are an old-line publishing or entertainment company involved in traditional businesses threatened by the Net. You see all of these companies coming public with small amounts of stock that then give them a currency to make deals and mount assaults on your businesses. You keep hoping that the stock market will cool off, but it doesn't. You keep hoping that the IPO market will die down, but it won't.
Why not take matters into your own hands? Why not raise capital yourself and, at the same time, sate all of the IPO buyers? Can you do it?
There have been as many as 30 deals this year that are Internet plays. That's a ton of deals, but they have only raised about $2.5 billion in capital. That's a pittance, yet it has created a hydra-headed .com that can crush traditional businesses that are bound by EPS, multiples and dilution, things that .coms don't have to worry about. (If you don't believe me, you weren't listening to
on the last
quarterly conference call, when he said that he didn't care about near-term results and was instead focusing on building a business!)
What keeps National Gift Wrap, Magazine & Movie Co., a major conglomerate with interests in cable, movies and entertainment that's got a small but profitable Web division, from killing two birds with one stone by issuing 100 million shares at 25 in National's Internet arm? In one fell swoop, you'd tie up all of the capital that would have been used for another 30 companies, you'd raise enough money to actually do something big in the space and you'd have a currency that would allow you to make dilutive acquisitions that wouldn't hurt the parent. You'd tap out the whole Net IPO dollar pool with this one, but good!
Barnes & Noble
have done this three years ago to stop Amazon? Shouldn't
have focused more on online shopping and sopped up the whole pool of capital? Or
I love the Net but have to believe that with this last blast upward, some of these old-line companies will adopt this strategy before it is too late and they lose the whole shooting match. If I were running National Gift Wrap, Magazine & Movie Co., I would be implementing this very strategy today.
It could be the only real Net killer out there.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in the stocks mentioned, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at firstname.lastname@example.org.