What's in a name? That which we call a subway station, by any other name, would still stink. But tell that to the San Francisco Municipal Transportation Agency, which announced last week that it was considering selling the naming rights to certain high-trafficked subway stations. If the agency has its way, new-economy companies will line up to pay millions to get their names affixed to public transit stations throughout the San Francisco Bay Area. The Snowball.com (SNOWD) subway station coming soon.
What's this got to do with the stock market? Everything. Wall Street is full of superstitions and myths; day-to-day swings in the market often have more to do with ritual fear than economic theory. Wall Street reacts to signs and signals - and now more than ever the Street is looking for sell signs. And when a company spends millions on naming rights, it has historically served as a sell sign.
One need look no further than the Super Bowl's AFC representatives, the Baltimore Ravens. The fledgling football franchise plays its home games at PSINet Stadium. On Jan. 26, 1999, PSINet agreed to pay the Ravens $105.5 million over 20 years to put its name on the new stadium. At the time, PSINet traded at $17.38. But now the stock is barely holding on at $2.50. The naming curse hit hard.
Need more examples? Look at 3Com (COMS). On Sept. 7, 1995, the computer networker agreed to spend $900,000 a year for the rights to affix its name on San Francisco's Candlestick Park. At the time, high-flying 3Com shares were trading at $39.50. They've fallen 70 percent since then.
Similar stock drops were foreshadowed in the naming of Network Associates Stadium in Oakland, Calif. Network Associates stock is down 82 percent since it sponsored the stadium in September 1998. The moves may impress sports fans, but they leave investors cold. "I have a problem with upstarts like Qualcomm and PSINet spending precious capital to slap their name on a stadium," says hedge fund manager Seth Tobias of Circle T Partners. "The world didn't need a '1-800-Flowers Bowl,' and 1-800-Flowers didn't need it either."
The worst-case scenario: the National Hockey League (dossier)'s St. Louis Blues, who are in a penalty box unique in the new economy. In August, the team sold its rink's name to Savvis Communications, an ISP, not just for cash but for 750,000 shares of Savvis stock, then trading at $10. Now Savvis is below $3, and the aptly named Blues have lost $5.25 million.
This all started in 1972, when Rich Products (dossier) bought the name on a new stadium for the Buffalo Bills (dossier). The team's owner, Ralph Wilson, initially refused to call Rich Stadium by its new name. After 25 freezing seasons, O.J. Simpson and an infamous wide-right field goal attempt, in 1997 the stadium was renamed Ralph Wilson Stadium in conjunction with a new lease. Rich Products never went public.
There is something of a science to this theory. Companies scrambling about to make a name for themselves aren't always the best-suited for throwing their corporate titles - and marketing millions - at sports teams. At best, these offers can be a marketing budget gone awry. At worst, they represent starstruck CEOs who'd rather see their name up in lights than see shareholders with glittering portfolios.
The ultimate irony, of course, is that the nation once turned its eyes to the rise and fall of great sports teams. Our country's morality plays, the creation and destruction of our dreams, were symbolized by sports. Now, it's the dot-coms and not-coms rushing in to fill that role.
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