On
March 17, 2005, Lux Research, an affiliate of Lux Capital,
launched a nanotechnology index (LUXNI) to list on the American
Stock Exchange. The first questions is, “Do we really need
another nanotechnology index?” With the way things are going,
is there going to be a need for an Index of Nanotechnology
Indices?
However, as far as nanotechnology
indices goes, this one looks more balanced than the Punk
Ziegel and Merrill Lynch which goes to show you that people
do learn. The exclusion of some of the larger companies
that do much nanotechnology research internally in the previous
indices, such as BASF, DuPont, HP, IBM, 3M, NEC, GM, and
Air Products, was a pet peeve and has been addressed in
this index.
In the meantime, Merrill Lynch has
been adding nanotech companies to their index since its
inception, such as with Lumera, pSivida, and Arrowhead Research
Corp. to name a few. At this rate, I am not sure with how
many companies this index finally ends up to have an accurate
reflection on nanotechnology business value. It also lists
on the American Stock Exchange at NNZ.
However, no one has based a mutual
fund based on these indices yet. Has anyone put their money
where their mouths are? Lux Capital at least invests in
some nanotech startups. Merrill Lynch’s venture capital
group has yet to move in this area yet. Out of the pack,
Merrill Lynch should at least start a fund since it is a
major investment banking firm. The question is the index
more for marketing reasons than anything else? So again,
as in a previous article, what is the point of the nanotechnology
indices if none of these entities is really investing the
picks as the index seems to recommend?
At this point, it seems the indices
act as nothing more than a glorified hype meter or measure
of the public markets’ interest in nanotechnology. Chances
are, if there is any major news, it will result in price
fluctuations in the index that day. If nanotech value is
based on public sentiment, then it is not a real measure
of the value of these nanotechnology companies. This argument
can also be extended into the tracking of stock prices and
their correlation to perceived value as opposed to the real
value that most assume stock prices measure.
However, public market reaction and
sentiment towards nanotechnology can be better assessed
by following what the media is thinking. Positive reactions
to nanotechnology and its perceived value can be confirmed
by tracking the number of articles and programs that have
a positive assessment of nanotechnology’s future. This is
important since in the couple of years before, the mass
media largely demonized nanotechnology. Lee Gomes of the
Wall Street Journal was one of the fiercest skeptics of
nanotechnology’s value to the people in the future.
However, if anybody has read “The
Tipping Point” by Malcolm Blackwell, the nanotechnology
tipping point may have arrived. In the past six months,
there has been an increase in articles and programs in the
mass media that are positive. USA Today has featured several
articles since December 2004, such as by Kevin Maney, which
talks about how nanotechnology is going to turn us all into
the Japanese teenage girls flashing the latest in modern
consumer electronics technology so you can impress all your
friends along with high performance nanotech sports accessories
and socks you never need to wash. In contrast, September
2004, Dan Vergano was still talking about Grey Goo and Michael
Crichton’s book “The Prey” but Liz Szabo was talking about
how The National Cancer Institute is launching $144 Million
project to investigate how nanotechnology will help fight
cancer better by being able to find and target and deliver
drugs to just the cancer cells and leave the healthy cells
alone. This could reduce the side effects from chemotherapy
significantly since healthy cells are not killed along with
the tumor cells.
The Economist started the year 2005
with a nanotech bang in their first issue out January 1,
2005 devoted to nanotechnology in their Nanotechnology Survey.
Business Week soon followed suit discussing the business
of nanotech in the February 14, 2005 issue.
The BBC (British Broadcasting Corp)
regularly reports on nanotechnology, and not just focusing
on the UK, with a nicely balanced piece involving UK and
US experts on December 30, 2004. (For some reason, the program
link is hard to find when searching under “nanotech” so
the link is provided here. http://news.bbc.co.uk/1/hi/programmes/analysis/4122285.stm)
CBS’s Sunday morning show on January
23, 2005 was probably the only major U.S. network to air
a television segment on nanotechnology interviewing the
likes of Steve Jurvetson and Ralph Merkle though the commentator
closed with the thought that anything important to come
out of nanotechnology was still at least 50 years away.
The History Channel is also including nanotechnology in
a program called "Modern Marvels: Future Tech."
All in all, a better sense and assessment
of public sentiment on nanotechnology can be obtained now
by following mainstream media by picking up the paper or
a magazine at the doctor’s office than by following a nanotechnology
index. Of course, the media is in business for itself to
make money and the media has and will change its position
again to suit its financial needs. That is not to say that
nanotechnology is above all that because its directions
also follow the money. However, the mass media influencing
the public perception of nanotechnology in turn influences
performance of publicly traded companies stock prices like
those on the nanotechnology indices.
Hence the mass media can control
the markets and the future of nanotechnology much more than
we would like to believe. Whoever controls or know how to
influence the mass media can determine the outcome of nanotechnology
in our lives and what entities become nanotechnology power
brokers. For instance using the mass media can significantly
influence the valuation of an IPO and we have seen this
happen in the past. The power of the press should be recognized
and acknowledged because there is a lot of money to be made
in nanotechnology.
So
beware. Seems the hype is on again. Let’s learn from the
past and prevent a nanotech bubble, shall we?
