Since you are so obsessed with that article I don't see why you couldn't have posted it yourself. But I am tired of hearing you whine about it so here it is. This doesn't include the partial retraction issued by the WSJ editor. A close reading will also disclose that the predictions made about the size and enthusiasm of the Chinese stock market were not exactly on target. That is the problem with making predictions - you might have to eat them later.
December 27, 1999
Hartcourt's Web-Trading Foray
In China Is Promoted Online
By AARON ELSTEIN
THE WALL STREET JOURNAL INTERACTIVE EDITION
Hartcourt Cos. has seen its stock soar as paid online stock promoters talk up the company's efforts to morph into an online-trading company in China.
Once a struggling maker of pens and magic markers in China -- and in a previous incarnation, an unsuccessful marketer of nontobacco cigarettes -- Hartcourt now has recast itself as an Internet-trading company in the world's most populous country.
Hartcourt Chairman Alan V. Phan has gone so far as to compare the company's online-trading venture in China, called UAC Stock Exchange On-Line Co., to that of E*Trade Group, the second-largest Internet broker in the U.S. In a press release, Mr. Phan said UAC "has positioned itself to become the first and major E-Trade in China."
But analysts say the Long Beach, Calif., company's business model differs from that of conventional Internet brokers such as E*Trade in that investors aren't able to trade directly over the Internet. Users are required to use proprietary software to dial-in to a brokerage firm's computer to make trades.
And while the Chinese online-trading market is potentially huge, analysts say it's developing very slowly and the government is resistant to opening up the market to firms outside the country.
Mr. Phan says his firm will more closely resemble E*Trade's business model as soon as the government allows. "We don't own a brokerage because the government won't permit that, but as soon as we can, we will, and we will do brokering over the Internet."
As for difficulties companies have had entering the Chinese trading market, Mr. Phan says "that's to our advantage" because his firm's business is already up and running.
Jared Peterson, an analyst with International Data Corp., a technology research firm based in Framingham, Mass., called the online-trading industry in China "tiny," and added that in the past foreign firms have had difficulty getting all the necessary government approvals to set up shop. This has left the industry fragmented amid dozens of small Chinese brokerage firms.
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UAC's online-trading system enables investors in China to connect their personal computers to a broker's trading desk via a dedicated phone line. Investors can make trades from their computers only through a dial-up connection.
Part of the reason that online brokers such as E*Trade have become so successful in the U.S., said Dan Burke, an analyst at Gomez Advisors, an e-commerce research firm in Lincoln, Mass., is that investors can trade from any computer with no special equipment required. Mr. Burke said he wasn't familiar enough with Hartcourt to comment on its plans.
Nevertheless, Hartcourt has roused investors hungry for a stock that combines two of the market's hottest topics: China and the Internet.
Shares in the company, which are quoted on the OTC Bulletin Board, surged to a high of 19 1/2 last week after trading as low as 3/4 in late October, and the company is generating tremendous buzz on the Internet. More than 29,000 posts have been made about the company on a single message board devoted to the company on Raging Bull.
Its shares Wednesday afternoon were trading at 16 7/8, down 1 1/4.
The stock's breathtaking ascent occurred amid relentless promotion by DDInvestor.com, one of two stock promoters that Hartcourt's Mr. Phan hired "to get us better known among investors." Since September, DDInvestor.com, an eight-employee operation based in Hackensack, N.J., has posted scores of messages on stock-chat sites such as Silicon Investor and Raging Bull, talking up Hartcourt's prospects. DDInvestor.com also has posted a report on its Web site about Hartcourt titled, "HRCT is poised to become The GIANT in China Internet."
In return, DDInvestor.com is paid $1,000 and 3,000 restricted shares per month, according to Mr. Phan and DDInvestor.com.
Hartcourt's Mr. Phan also is paying a German representative who has hired a promoter called Stockreporter. Stockreporter issued a report on Sept. 11 -- when Hartcourt's shares were trading at 1 1/4 -- in which it rated Hartcourt shares a "strong buy." The site claimed the stock was worth as much as $9, saying the shares were "drastically undervalued."
A few online investors have become suspicious about all the paid promotion, pointing out that Hartcourt's past business endeavors in China have been unsuccessful. "It's just a matter of time before all the day traders and newbies run for cover," posted one critic on Silicon Investor. |
