In the Wild World of Internet Postings,
Sometimes Bad News Is Good News
By REBECCA BUCKMAN
Staff Reporter of THE WALL STREET JOURNAL
Internet chatter these days can drive up shares of tiny companies with no profits -- and, sometimes, no continuing operations.
Take NEI WebWorld Inc., a Dallas printing company in bankruptcy proceedings and whose stock was involved in an alleged Internet stock scam. NEI shares soared nearly 1,170% Thursday, a day after news of the alleged scheme broke. Shares hit a high of $2.375 Thursday before closing at 31.25 cents, up a still-significant 67% on the OTC Bulletin Board, a stock-quotation service run by the National Association of Securities Dealers. The stock had closed Wednesday at 18.75 cents.
The reason for the surge? Apparently, simply the fact that the stock's name was in the news -- even though the news was none too positive. On Wednesday, the U.S. Attorney for the Central District of California said his office had charged two men with fraudulently pumping up the price of NEI over two days in November by posting false rumors on Internet message boards. The Securities and Exchange Commission also filed civil stock-fraud charges against the two men and an associate. NEI wasn't accused of any wrongdoing.
Authorities said the message-board rumors, about a purported takeover by another company, were completely false and designed simply to drive up the price of NEI's thinly traded stock so the defendants could profit from it. NEI last year filed to liquidate under Chapter 7 of the federal Bankruptcy Code and no longer has a listed phone number in Dallas.
No matter. The mere mention of NEI's name in the media seemed to prompt the new breed of quick-fingered Web "momentum" investors to jump in, generating enough trading in the stock to propel its price skyward. These investors typically try to take advantage of trading momentum to ride stocks up, and then dump them when they think shares have peaked. [...]
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