A group of mathematicians have been putting together a statement that explains some of the background to, and reasons for, the Elsevier boycott. This statement, which has been signed by 34 mathematicians (we are confident that many more would be happy to endorse it, but we had to stop somewhere), is now ready for release. If you are interested in reading it, then click here.
While I’m posting, let me briefly mention one or two items of Elsevier-related news.
1. Elsevier have written an open letter defending themselves against some of the charges that have been laid against them. (I plan to write a post soon responding to some of their points.)
2. In what I see as a fairly dramatic development, Ingrid Daubechies, President of the International Mathematical Union, has signed up at The Cost of Knowledge website, declaring that she has resigned from her editorial roles with Elsevier. I know of other people who have done the same, but I am not sure that they want that information to be widely publicized, so I think I had better not say who they are.
3. Apparently the boycott caused the Elsevier share price to fall. Amusingly, the investment firm Exane Paribas regards this as an opportunity to make money:
Please find our 8 page report on Reed Elsevier released this morning. We argue that:
Noise around boycott against Elsevier offers short term trading opportunity
Reed Elsevier was the worst performing media stock last week. We believe this is due to investor concerns on the back of T. Gowers’ petition to boycott publishing and refereeing in Elsevier’s journals. We believe the share price reaction was overdone and recommend buying the shares.
Scientists are boycotting the boycott
Similar petitions in favour of Open Access were organised in 2000 and 2007, with no impact on Elsevier’s fundamentals. Our tracking not only shows that this latest petition lags behind the two preceding ones but also suggests that its momentum is slowing. Fewer than 5,000 scientists have signed up, whereas Elsevier works with more than 6m scientists worldwide. The low take-up of this petition is a sign of the scientific community’s improving perception of Elsevier.
Open Access unlikely to hurt financials in the medium term and is priced in
The proportion of Open Access is growing at less than 1% pa. Elsevier’s contract lengths are getting longer and the company’s growth efforts are focused on new products rather than pricing. Open Access is unlikely to hurt Elsevier in the next five years and the longer term risk is more than priced in, in our view.
Results are due on 16 February
We expect EPS11e of 47p, slightly ahead of the consensus 46p, and an outlook supportive of the group’s defensive growth profile and improved fundamentals. The announcement of a new CFO and a possible share buyback could be two additional positives. Reed Elsevier PLC trades on EV/EBIT12e of 8.8x. It offers defensive growth at a reasonable price. We remain buyers of the stock on the current share price weakness.