Re: MGM combats fake message posted on Yahoo
MGM combats fake message posted on Yahoo
By Reuters
Special to CNET News.com
October 21, 1999, 9:20 a.m. PT
LOS ANGELES--In another warning sign for investors using the Internet, a bogus posting from someone claiming to be MGM's former chairman led the film studio to post a note warning investors to beware.
Late Tuesday, visitors to a Yahoo message board saw a note from someone using the name "frankgmancuso," advising shareholders to sell MGM stock ahead of a planned stock rights offering, which would eventually dilute the number of shares outstanding and place downward pressure on the stock price.
The bogus message pointed to MGM's stock drop of around 2 points Tuesday as evidence of shareholders starting to sell stock. But the rights had already started trading, and the falling stock price was primarily because of a technical adjustment after their issuance.
The real Frank G. Mancuso
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resigned as MGM chairman and chief executive last spring, but he is still a consultant and member of its board. So a warning bell from Mancuso sounded a fairly ominous note for investors.
But Mancuso did not post the note. Investors quickly called his office, which then informed MGM. After consulting with attorneys, MGM posted a message using the name "mgmcorporate" warning investors that Mancuso was not the posting's source.
MGM said the message appeared to be from short sellers who were attempting to affect the stock price, and it warned that doing so was a violation of U.S. securities laws.
"Frankly, we had some reluctance in dignifying the message, but we felt the issue was serious enough to warrant our posting," said MGM senior vice president Craig Parsons.
A short seller borrows stock from a stockholder and then sells it, hoping the price will decline and the short seller can repay the borrowed shares at a lower price and pocket the difference.
As of last month, MGM had a fairly large short position of 3.7 million shares out of a total of roughly 15 million shares in public hands, according to MGM, meaning there were quite a few market players who wanted to see the stock fall.
The story may remind some stock watchers of last April's bogus posting on Yahoo concerning a southern California technology company called PairGain. In that case, a phantom message linked investors to what was purportedly a news story speculating that PairGain was a takeover target.
The bogus story sent PairGain shares soaring 31 percent before it was detected as false and yanked from the board by Yahoo. FBI agents traced the bogus message to a PairGain engineer, and he was arrested.
As a general rule, Yahoo does not comment on specific postings on message boards, a representative said. But it does offer a disclaimer on its message boards that the notes are opinions of people posting them, "are no substitute for your own research," and "should not be relied upon for trading."
Story Copyright¸ 1999 Reuters Limited. All rights reserved.
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