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Friday, November 25, 2005

Taser Stuns the Market...Not

Every once in a while - well, every week or so, actually - I get a call from some boiler room telemarketing center, where a guy with a thick New Jersey accent insists that we spoke a month earlier. At that time, he tells me, he gave me a free stock tip that, had I listened to him, would have already tripled in value. I used to be polite to these people, but no more. Now I just drop the receiver and continue with my work. Takes all of about 10 seconds.

The reason I'm even mentioning this is because over the last year, one of the stocks these dummies were hawking was a company called Taser. In case you haven't heard of them, Taser is the company that makes non-lethal, electrically-charged stun guns. These are the weapons that various police forces use to "neutralize" violent suspects who resist arrest. It's not as fun as shooting them with real bullets, but it keeps officers out of trouble. Besides, it's still kind of funny to watch a suspect flop around like a trout on a hot sidewalk.

After al-Qaeda laid waste to the World Trade Center and took out a chunk from the Pentagon in 2001, Taser started to get a lot of attention. The Arizona-based company seemed to have the answer to the problem of guarding public safety at 35,000 feet. No bullets. No risk of cabin decompression. No innocent bystanders taking a hit. Just pure, fried terrorist with every discharge.

Taser began as a penny stock (or thereabouts), but the hype of the brand powered its performance. The company got major media awareness. Its CEO was interviewed by everyone who was anyone, smartly answering questions from anyone who would ask them, preferably with a nationally-televised program. There were just as many appearances on financial shows as new shows, incidentally, one reason why the stock soared past $30 per share and beyond.

The only problem was that there was no value behind that value.

This week, TASR is no longer a stock you can find on the NASDSAQ exchange. You can find Taser, the company, re-listed as TASRE - because they're fighting NASDAQ's action to de-list them from the exchange. The stock is dropping like a brick, barely at a fifth of its previous high. That's right, it's off 80%.

How, you might ask, can something like this happen? Even after the billions lost in the internet stock bubble, the energy and telecom frauds, are people really so gullible?

The answer, unfortunately, is yes. But you knew that already. The real, useable data from this story is that brands with no value are exactly that: brands with no value. The real lesson here is a reprise of what I wrote in my book long ago: just because a brand has high awareness doesn't mean it has any value. And the minute the public finds that out, you, my friend, are hosed.

Taser is currently scrambling to get its house in order, which in financial-speak means scurrying around it offices, trying to put enough paper together to keep NASDAQ happy and its losses to a minimum. Personally, I hope they make it. I never much cared for the idea of guns on airlines: just because a guy can safely land a 747 doesn't mean he's a particularly good shot.

In the meantime, if you're really hunting for an undervalued stock, start looking at the brands where no amount of window dressing can hide the awful truth. Start looking for high dividends and established value. Hmmm, did somebody say "General Motors?"