Truth Serum: Why You May Wish You Never Heard of Log On America
By Dan Colarusso
Associate Editor
9/17/99 12:54 PM ET
thestreet.com
We confess to not having been the least bit familiar with Log On America (LOAX:Nasdaq - news) before Sept. 2, when the company's prospects were outlined in Business Week's Inside Wall Street column.
Trust no one when it comes to the media? Talk about it on our message board.
The magazine reported that a "U.S. telecom company" was going to pony up $25 million for 10% of the Rhode Island outfit, then valued in the stock market at $172 million. Just that sentence was apparently enough to make half of America order bagels and LOAX for breakfast, sending the stock to an open of 25 1/4 that Friday from its close of 20 7/8 the previous day. Soon after the open, however, Log On execs said a deal was in the works but by no means finalized. The shares, which had traded as high as 25 1/2, settled at 22 9/16 as volume shot to 1.8 million shares from the daily average of 129,409 shares, a clear sign of Inside Wall Street columnist Gene Marcial's power. There's a catch, though. If you bought Log On America shares then, you got hosed. Specifically, at Thursday's close of 16 5/8, you're down some 35% if you bought at the shares' Sept. 3 peak. Logging OffLog On America shares slide following a sharp run-up
You shouldn't be surprised. While the story nailed some information that the company confirmed (though on a deal it has yet to consummate), the roots of that info are strangely intertwined. It comes from a small group of players who are closely, and in some cases intimately, connected. Marcial says his story was on the mark, despite the company's reticence to help pull the bandwagon. "How can they say they have a deal before they do?" he asks. "They admitted they were in talks, right? I know there's a company that's very interested [in investing in Log On]. I know that for a fact." To support that "fact," Marcial leaned on Joseph Vaini, an analyst with an outfit called ITM Group. Vaini says ITM does technology consulting for Security Capital Trading, which is the only firm that had an analyst covering Log On as of Friday. That analyst: famed whistle-blower and self-proclaimed short-buster Ray Dirks. Dirks' wife, Jessie Dirks, meanwhile, runs investment bank Dirks &am........................
Senior writer Jesse Eisinger contributed to this story. |
