Posted at 1:17 a.m. PDT Tuesday, August 17, 1999

Stock need a boost? just add 'dot com' - study


NEW YORK (Reuters) - A sure-fire boost for a sagging stock is to link the company to the hot Internet sector by adding an extension to the name, a study shows.

In a sign of the so-called ``dot com effect,'' rejigging a name is often enough to cause a hefty rise in the share price, according to the Purdue University study, ``A by Any Other Name.''

The study showed that the stock price of companies that changed their names to show their links to the Internet rose 125 percent from five days before the switch was announced to five days after.

The results raise some questions about whether the market always sets its prices rationally, said Michael Cooper, assistant professor at Purdue's Krannert School of Management and one of the report's authors.

``The returns from it are so large that it does make you stop and scratch your head a little bit,'' he said in a telephone interview from Purdue, in Lafayette, Ind.

Over a longer period, the average price per share of the companies surveyed rose from $2.15 15 days before the announcement to $5.86 15 days after the change was publicized.

The average volume traded for the period rocketed from 14,124 shares to 66,500.

The most striking effect was for non-Internet companies that said they would shift their focus to the World Wide Web. Their prices rose 189 percent in the 30 days surrounding the name change.

The survey covered 52 companies that had changed their names from June 1998 to the end of March this year. The new names incorporated ``.com'' -- a common marker for Web sites -- ''.net'' or included the word ``Internet.''

Thus, Courtleigh Capital Inc. became Web technology company Inc. and Comgen Corp. dubbed itself Corp. as an electronic commerce company.

The New York Bagel Exchange Inc. mutated into Inc., an Internet portal for the boating industry.

Except for New York Internet service provider Inc., once known as Cellular Vision USA, the companies all trade on the small-capitalization Nasdaq electronic bulletin board.

The name changes shadowed the overall Internet surge. The study said there were no switches to ``dot com'' names before June 1998, but they averaged five a month after that.

The volatile Internet sector is holding on to big gains stemming from late 1998 and early this year. Despite a selloff in the last four months, Internet index is up 32 percent on the year.

Cooper, who wrote the report with assistant finance professor P. Raghavendra Rau, said many of the companies that changed their names had been little known and overlooked by most analysts and investors.

The new names focused attention on them and helped attract short-term day traders.

He added that he was planning to update his study.

``I'd be willing to bet that relative to where they were, they are still up there,'' he said.