Re: 11/22/00 - [VERT] WSJ: VerticalNet Chairman Logs On To Keep Tabs on Online Attacks
November 22, 2000
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VerticalNet Chairman Logs On
To Keep Tabs on Online Attacks
By AARON ELSTEIN
WSJ.COM
Mark Walsh, chairman of VerticalNet Inc., can't help himself.
With shares of his company down more than 90% this year, Mr. Walsh might do well to avoid the Internet message boards where his company, considered a bellwether in the "B2B" e-commerce sector, frequently takes a beating.
But a couple times each month, he visits the boards on Yahoo! to assess what people are saying about VerticalNet, as well as its competitors. "The sheer vitriol of what I read amazes me," he says. "Not to mention that a lot what is stated as fact simply isn't true."
For instance, one message-board poster wrote that Mr. Walsh "dumped his shares like a daytrader." But the chairman says he sells 3% of his holdings every quarter, regardless of VerticalNet's stock price. According to regulatory filings, his stake as a percentage of the company has increased since it went public last year.
As Internet message boards have become increasingly popular and, many claim, increasingly irresponsible, Mr. Walsh and other executives are mulling how to respond. Most message boards don't require people use their real names when publishing statements about companies, and some executives say that short-sellers exploit this by anonymously posting inaccurate information to frighten investors.
Dozens of companies have reacted to message-board criticism by filing lawsuits to ferret out their critics' identities. In some cases, companies have forced their foes to apologize for publishing false statements, including Log on America Inc., a Providence, R.I., Internet service provider, and Talk Visual Corp., a Miami teleconferencing company.
Other executives have gone to the boards themselves in an effort to win the support of at least a portion of the online community. For example, earlier this year Jeremy Barbera, chairman and chief executive of Marketing Services Group Inc., a New York Internet marketer, and David Wetherell, chairman and CEO of CMGI Inc., the Andover, Mass., Internet-investment company, frequently appeared on the stock-chat site Raging Bull.
Neither course appeals to Mr. Walsh. "I don't feel I can go to the boards and respond directly because I don't want to dignify what's going on," he says. A free-speech proponent, he says he isn't inclined to sue.
"I respect the rights of others to express their opinions. But what's going on in the boards concerning my company, and lots of other companies, is simply out of hand."
Les French, who runs John Does Anonymous, a Portland, Ore., group that tracks libel suits involving Internet message-boards, says executives such as Mr. Walsh should publish messages on the boards to refute their critics. "Such an act would be respected by legitimate shareholders."
To be sure, there are legitimate questions surrounding VerticalNet. The company remains unprofitable and expects "to incur significant operating losses for the foreseeable future," according to its most recent quarterly filing with the Securities and Exchange Commission.
Shares in the Horsham, Pa., company, which operates 57 online "communities" where companies can shop for supplies, soared to as high as $148.38 in March. But at 4 p.m. Tuesday on the Nasdaq Stock Market, they fell $1.13 to $13, a 52-week low.
Short-sellers have set their sights on the stock and as of October, accounted for nearly 12% of the company's publicly available shares, according to the National Assocation of Securities Dealers.
Mr. Walsh believes short-sellers, who profit from falling stock prices, are responsible for most of the inaccurate statements that have helped depress his company's shares. But he acknowledges he has no proof that this is the case.
George Santana, an analyst at Wedbush Morgan Securities, likens VerticalNet to a cable television service with 57 channels and questions whether anyone is watching. Many of its "communities" don't draw enough visitors to register with Media Metrix, a New York firm that measures Internet traffic. "We believe VerticalNet has an incredible amount of work to do in order to succeed in the long term," says Mr. Santana, who rates the stock a "hold."
But on the whole, Wall Street remains quite bullish about VerticalNet. Of the 28 analysts who follow the company, 27 rate its stock a "buy" or "strong buy,"according to First Call/Thomson Financial. And institutional shareholders seem to be keeping the faith. "What happened to VerticalNet's stock isn't all that different from what happened to Yahoo or eBay," says Alan Lowenstein, co-manager of the John Hancock Technology Fund, which owns more than 400,000 VerticalNet shares. Yahoo has fallen 83% from its 52-week high, and eBay is off 75%.
VerticalNet reported a third-quarter loss of $76 million, or 20 cents a share, eight cents ahead of consensus expectations, on revenue of $73.7 million. That compared with a loss of $25.8 million, or 15 cents a share, and revenue of $5.1 million in the year-earlier period. Many analysts are enthusisatic about the company's alliance with Microsoft, which has invested $100 million and is directing traffic to VerticalNet's sites.
But individual investors seem to have gotten downright ornery about the stock. When Mr. Walsh was named "CEO of the Year" last week by a Philadelphia business group, one message-board participant snapped that the chairman should mind the shop more. "VERT needs some serious attention if it is survive. Making speeches and receiving awards won't cut it."
Mr. Walsh isn't the only executive who is wary of going online to respond to criticism.
Mr. Barbera, the chief of Marketing Services Group, regularly appeared on Raging Bull earlier this year but says he won't do it any longer. He says that's partly because of recent securities regulations on disclosing new information, but also because he found the experience rather unpleasant. As his company's stock slipped from a 52-week high in February of $29.50 to $2.06 Tuesday on Nasdaq, "People didn't want to talk about my company and its fundamentals, they just wanted to talk about the stock and I don't have control over the market," Mr. Barbera says.
Mr. Wetherell of CMGI continues to hold question-and-answer sessions on Raging Bull, although he has held only one since May after conducting them monthly earlier in the year. "I apologize that I have not been more present on the boards as a poster, but I assure you that I am 'lurking,' " he said in a recent message.
Mr. Walsh says he think the companies that sponsor message boards ought to limit anonymity so people can better evaluate what others say.
Write to Aaron Elstein at: aaron.elstein@wsj.com
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