<Investors have long used Internet message boards to discuss stocks -- some with malicious intent. For example, posters may try to encourage other investors to dump shares so that they can buy them at a cheaper price,>
May 11, 2000
Heard on the Net
Message Board Blatantly Urges
Investors to Manipulate a Stock
By CARRIE LEE
THE WALL STREET JOURNAL INTERACTIVE EDITION
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Short-sellers are investors who hope to profit by betting that the price of a stock will decline. They do so by selling shares borrowed from their broker, expecting to replace them for less when the price falls.
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But the plan may face a different test from securities regulators, who have been cracking down on stock manipulation and securities fraud on the Internet. John Reed Stark, chief of Internet enforcement at the Securities and Exchange Commission, says a unified effort to influence a stock may be illegal. He declines to comment specifically on the Globalstar board.
"If you're trying to artificially inflate or DEFLATE the price of a stock, whether by false information or otherwise, it can be a manipulation and a potential securities violation," Mr. Stark says.
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But the potential legal issues are unchanged, whether a plan such as the Globalstar board succeeds in moving a stock or not, says Bill McDonald, enforcement director for the California Department of Corporations, which is the state securities regulator in California.
"It is clearly market manipulation, it is clearly illegal," he says. "These people are clearly trying to manipulate the market and say so blatantly, other people are led to try to get a piece of the action."
Investors have long used Internet message boards to discuss stocks -- some with malicious intent. For example, posters may try to encourage other investors to dump shares so that they can buy them at a cheaper price, or pump up a stock's price so that they can sell at a profit.
Silicon Investor prohibits members from using its boards to engage in illegal activity. "We do respond to regulatory agencies that inform us of illegal practices, but that area is not our expertise," says Byran Burdick, a spokesman. "As an investor I would be suspect of what this guy is doing."
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Write to Carrie Lee at carrie.lee@wsj.com
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