WASHINGTON—After several stocks soared in recent months by adding the word “blockchain” to their names, some economists drew strong parallels with similar name changes during the dot com bubble of 2001.
A 2001 Purdue University study found that the stock prices of companies which added “dot com” or “net” to their names rose 74 percent on average over the period from five days before to five days after the name change, capitalizing on investor mania for internet stocks in the late 1990s.
“It’s pretty much the same phenomenon this time around with blockchain,” said Raghavendra Rau, one of the study’s co-authors and current finance and accounting department head at the University of Cambridge, in an interview. “People don’t necessarily spend a lot of time actually doing the research on these companies.”
Blockchain is the technology used to record bitcoin interactions. Several companies saw their stock prices rise by anywhere from 50 percent to 200 percent immediately following blockchain-related name change announcements.
The stock of Long Island Iced Tea Corp., which sells non-alcoholic beverage, rose 180 percent following a name change in December to Long Blockchain Corp. Shares of Bioptix Inc., which makes diagnostic machinery for biotechnology companies, rose 50 percent after re-branding as Riot Blockchain in October. And the stock of On-line Plc, a British internet and information technology company, soared 174 percent after announcing it would change its name to On-line Blockchain Plc in October.
“At Riot Blockchain, our team has the insight and network to effectively grow and develop blockchain assets,” said Michael Beeghley, Riot Blockchain’s CEO, in a press release. “With new applications being developed for blockchain every day, this is a rapidly growing and evolving market.”
Rau said such an investment had serious risks.
“It’s like buying a lottery ticket,” said Rau. “You can’t be sure which one will take off, but you still buy because you hope that one of them will.”
Even if the cryptocurrency market does experience a major crash like internet stocks did in 2001, it may not be all bad news for the new blockchain names.
A second study out of Purdue which was co-written by the same authors—this one released in 2002—found that companies which removed “dot com” from their names after the crash enjoyed abnormal returns of 64 percent on average in the 60 days surrounding the name change.