Re: 9/11/00 - Forbes: Dangerous Chatter; Chatspeak
Dangerous Chatter
Like any crowded area, those stock message boards are full of pickpockets. Here are some ways to avoid them.
BY DANIEL FISHER
THEY MIGHT NOT ADMIT IT, BUT MORE THAN A FEW professional investors and big company executives regularly surf the stock message boards. Why, you may ask? Why wade through all that garbage? It is a way of eavesdropping on what ordinary people are saying about their companies. For high executives, often sheltered from unpleasantness by solicitous subordinates, this can be a useful dash of reality.
But for investors all this chatter poses dangers. On May 18, 2000, a 12: 09 a.m. posting on Yahoo's board for Costco, by "news to use" warned, "Terrible news for shareholders. Get out before the collapse...."
Less than a week later Costco missed earnings estimates by a mere penny yet its stock dropped 30% in a day to $26. Investors were made nervous, in part, by the wild rumors circulating on the boards. Once the market digested the true impact of that tiny shortfall, the stock recovered somewhat and now sells for around $35. A few day traders may have profited from the rumor--on both the long side and the short side--but any investor stupid enough to have sold in the panic paid a heavy price for his gullibility.
At least there was some shred of reality behind what happened to Costco. On lesser-known stock boards, there are often more sinister schemes afoot.
Why wade through the garbage? It's a way of eavesdropping on what ordinary people are saying about your company.
Late last year, for example, somebody got interested in a forlorn little stock called Autolend Group, an Albuquerque, N.M. company operating in Chapter 11 bankruptcy, that was perhaps most famous for once having former House Majority Leader Tony Coehlo on its board.
"Anything up with AUTL?" posted someone named Due Diligence on Silicon Investor, a popular tech stock message board, on Nov. 10. "Been watching for a couple days."
Not even a rumor, just mention of the name. A few weeks later, AUTL shares soared from 4 cents to 34 cents as trading volume jumped to 1.9 million shares from just 1,500 a couple of days before. The next day, they were back at a nickel.
If you suspect somebody made a nice profit selling into the runup you are certainly right. Asked about the action that followed his posting, Due Diligence replied with a seeming smirk. "Don't know why," he posted. "Don't care now, either. If ya get my drift?"
We did. So did a few others. "Thanks for the $11k," posted somebody else named Can Do Stocks 2.
Beware: Promoters often hatch a plan on Silicon Investor and then go party on Raging Bull.
AUTL's rise and fall was a classic "pump 'n' dump" scheme perpetrated on stock message boards practically every day.
What those reading the boards didn't know was that on the day of AUTL's sudden price surge, somebody sent out a barrage of e-mail messages to thousands of investors, known as an "e-mail blast," calculated to drive up the price of the stock.
If the human drama of all this fascinates you, go ahead and surf away. But don't get taken. Here are a few hints to avoid getting sucked into a message board scam:
• Learn message board rules at the each site and familiarize yourself with common jargon (see glossary p. 68).
• Avoid o-t-c bulletin stocks and their boards altogether. Stock manipulators tend to prey on stocks priced below $5 per share. These stocks often fall below regulatory radar. If an e-mail comes in about a low-priced stock, delete it.
• Check a message poster's history. On Silicon Investor, Raging Bull, Yahoo and Motley Fool, it's easy to click on a name and get a person's previous posts, as well as rating scores by other readers. Raging Bull awards four dollar signs to posters who get good ratings from their peers. A search for Due Diligence on Silicon Investor yielded hundreds of e-mail postings, most involving a variety of questionable little stocks.
• Check the membership date. Clicking again on a poster's background page may reveal that she registered for the site that day. If that's the case and she already has tens or hundreds of messages, watch out! This person is probably a veteran spammer.
• Veteran hypesters often assume a new alias--all it takes to post on most boards is a separate e-mail address. If you suspect an old spammer is posting under a new alias, search for telltale words within the text of messages and look for match-ups.
• Don't fall for the "newbie" trick. Many of the people who claim to be newcomers to a site are just trying to drum up interest using a fresh name. Check whether they've been a newbie on other sites.
• Look for phantom dialogue. Sometimes two posters exchanging tips on a stock are really the same person, scamming the gullible. Use the message search function to see if they've been talking on other boards.
• Scan multiple boards. One message board veteran says promoters often hatch a plan on Silicon Investor and then "go party on Raging Bull," blitzing the more popular site with messages to drive up the price. Sites like CompanySleuth.com and Boardcentral.com provide links and alerts to postings on various boards.
• Better yet, visit the message boards for entertainment but don't be dumb enough to take the postings seriously.
See also: Chatspeak
™ © 2000 Forbes.com
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Chatspeak
Internet stock message boards have their own lingo that can make them almost unintelligible to the uninitiated. Below, a glossary:
Basher: Anyone with the audacity to suggest that an o-t-c Bulletin Board-listed company with no earnings, no revenue and a history of run-ins with regulators is a bad investment. Usually presumed to be in the employ of evil short-sellers (see below).
DD: Due diligence, a reference to the detailed, almost ritualistic investigation an institutional investor is legally obliged to perform before buying a stock. On chat boards, "dd" is used to refer ironically to a press release or unconfirmed rumor, as in "Great dd on that perpetual-motion machine."
IMHO: In my humble opinion. Disclaimer following a completely groundless rumor.
LOL: Laugh out loud. Customary dismissal of "basher" comments (above) which usually turn out to be true.
Long: Investor who holds a stock, or wants others to think he does.
Long and strong: Investor who rode a stock from $5 down to 5 cents and feels the need to boast about his ability to sustain a loss.
Momo: Upward momentum, the hazardous ascent phase when investors make large paper profits before the price collapses.
Newbie: New visitor to a board. Usually a wolf clad in sheepskin and trying to generate interest in a stock, as in "Hey, I'm a newbie to this board and this stock looks really promising. Anybody got any dd?"
Pump 'n' dump: A scheme in which insiders pump up a stock with hype (see "momo" above) and then dump their shares on unwitting investors (see "long and strong"), with predictable results.
ROFLMAO: Rolling on the floor laughing my ass off. Whatever this person is ridiculing, you can probably take to the bank.
Short: Also called a short-seller. Often dismissed as liars who "short and distort" or are "killing the dream," their presence is often a warning to the unwary that the stock involved is a "pump 'n' dump" (see above).
Short squeeze: The triumph of the longs, in which short-sellers are forced to buy stock at any price to cover their positions. Occurs less often in fact than is trumpeted on the message boards.
Spam: Unmitigated hype distributed across multiple message boards. As opposed to the targeted hype posted on specific stock boards
™ © 2000 Forbes.com
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