"Marketing Direct. Michael Calderone, head of Marketing Direct, says he doesn't see anything wrong with the arrangements."
For-Hire Research
When shares of Oshman's Sporting Goods, a Houston retailer, surged 17% in one day during July, the sudden rise was ascribed to a pair of bullish research reports and a buzz about the company on the Net. But what wasn't immediately apparent was that one of the analyst reports was paid for by Marketing Direct Concepts, a Las Vegas firm with a stake in Oshman's valued at more than $100,000, at the time. The firm paid a public-relations wire service to distribute both of the analyst reports, and it created a Web site about Oshman's that was akin to the sites many corporations use to highlight financial information. Oshman's says it has no affiliation with Marketing Direct. Michael Calderone, head of Marketing Direct, says he doesn't see anything wrong with the arrangements.
interactive5.wsj.com
The Wall Street Journal
September 8, 1998
Surfer Beware
The on-line message board posting that tipped you off to "the next Microsoft" may have been written by someone who was paid by the company to promote its shares. Likewise, that slick Web site you visit listing hot stock picks may also be little more than a paid advertisement.
The Internet is offering investors access to a wealth of investment information and data that previously was available only to professional investors. And it has opened up broad avenues for individual investors to swap ideas and information about stocks and the market. But it also has uncorked a genie's bottle of regulatory headaches.
A veil of anonymity comes along with the quick, world-wide reach offered by Internet communications. Stock scams are on the rise, especially involving shares of the tiny, unseasoned companies often quoted on the National Association of Securities Dealers' OTC Bulletin Board service. And there are plenty of other on-line practices that unwitting investors may stumble across that may not be in violation of the law.
Here is a sampling of some of the confusing practices that have been highlighted recently in The Wall Street Journal Interactive Edition's "Heard on the Net" column:
Profiles for a Price
Readers of the Stock Genie Web site (www.stockgenie.com) are treated to an electronic-mail newsletter, stock quotes and a rundown of monthly stock profiles. Its April profile, Voxcom Holdings Inc., presented as a selection of the Web site's analysts, paid Stock Genie $50,000 in cash and 10,000 shares of the company's stock in exchange for the profile. The compensation was disclosed, although it was buried in a more than 500-word disclaimer. Stock Genie says it has presented some stock profiles for which it hasn't received compensation. Gary Fischoff, an attorney for the site, says, "Anyone who reads the Web site clearly understands that it's a public-relations tool and there is compensation involved."
PR Postings
This message-board posting sounds like one from just another cheerleading investor: "I'm hearing rumors of good news... . Hang on, we aren't done yet." But in reality, the posting was made by an employee of Liberty Capital Group, a Bellingham, Wash., public-relations firm that was hired to promote -- and had a stock position in -- the company. The postings didn't disclose the firm's stockholding, and some postings didn't clearly disclose the affiliation with Liberty Capital. J. Allen Greig, president of the firm, views the use of message boards as an innovative way to reach investors. "I'm hoping that we will set an example for other PR firms," he said in an article published in July.
For-Hire Research
When shares of Oshman's Sporting Goods, a Houston retailer, surged 17% in one day during July, the sudden rise was ascribed to a pair of bullish research reports and a buzz about the company on the Net. But what wasn't immediately apparent was that one of the analyst reports was paid for by Marketing Direct Concepts, a Las Vegas firm with a stake in Oshman's valued at more than $100,000, at the time. The firm paid a public-relations wire service to distribute both of the analyst reports, and it created a Web site about Oshman's that was akin to the sites many corporations use to highlight financial information. Oshman's says it has no affiliation with Marketing Direct. Michael Calderone, head of Marketing Direct, says he doesn't see anything wrong with the arrangements.
The Lion Master
If you went to any one of dozens of investing forums on the Yahoo! Web site earlier this year, there was a good chance you'd have crossed the path of "Lion Master." That is the screen name used by Sam Ko, a 27-year-old computer systems engineer from Milpitas, Calif., who developed a devoted following on the message boards. He acknowledges that he often purchases shares in companies before he makes his recommendations. The share prices of the thinly-traded stocks he often picks sometimes respond as word of his recommendations makes its way around the Net. Mr. Ko says he doesn't see any problem with his purchases, and has encouraged message-board readers to buy along with him. "Join me and let's make $$$," he wrote in one message-board posting.
-- A Wall Street Journal Interactive Edition Roundup
|
