Friends, this article discusses internet chat rooms, Porter, TSE, Phillips, attempts to stop posters, etc.....
Teleglobe deal was old news in the chat groups
Andy Riga-The Gazette
Experts who watch the telecommunications industry may have been surprised by Teleglobe Inc.'s takeover of U.S. long-distance provider Excel Communications Inc. this week, but the folks who frequent Yahoo!'s stock-market chat groups had been in the know for awhile.
On June 4, 10 days before Montreal-based Teleglobe's $4.6-billion offer was announced, someone calling himself XL_CASUALTIES publicly asked, "Does anyone know anything about the rumour that Teleglobe is buying Excel?"
Of course, to get to that juicy bit of gossip, you had to wade through lots of garbage - personal arguments between users, sales pitches by Excel representatives, get-rich-quick schemes, diatribes about the quality of Excel's service and exaggerated claims about how high Excel's stock would go.
Despite the questionable quality of the material and the enormous room for abuse, online stock-message boards set up to allow investors to discuss publicly traded companies are growing in popularity - and are increasingly controversial.
In recent weeks, two troubled companies listed on the Toronto Stock Exchange - Philip Services Corp. and YBM Magnex International Inc. - posted their own messages in online discussion areas, also known as chat rooms or electronic bulletin boards.
They complained that anonymous users claiming to be investors were using the sites to damage their companies' reputations.
In a Yahoo! chat room, Philip, a scrap-metal company in financial trouble, vowed to track down the sources of the attacks, some of which were said to be libelous. Some message-writers apparently discussed stalking company executives. Other messages, the firm said, were written by former employees who appeared to be illegally disclosing confidential information.
Attempts backfire
Over in a Silicon Investor chat room, YBM Magnex, a magnet-maker accused of insider trading and of having ties to the Russian Mob, defended itself publicly and told critics to pipe down.
But the two attempts to fire back ended up backfiring. In both cases, the media picked up on the story, shining a spotlight on the controversies already swirling around the companies.
In another case, the TSE threatened legal action against options trader Porter Davis, who had used chat groups to criticize the
exchange. Davis stopped posting two weeks ago, but the TSE continued to be lambasted.
Companies like Ottawa software-maker Corel Corp. have been hammered online by investors angry about financial results and about stock-trading by Michael Cowpland, who sold $20.5 million worth of Corel shares last year, before unexpectedly bad results were announced.
As Philip, YBM Magnex, the TSE and Corel have proved, the flood of information on these sites is impossible to regulate or to monitor. Investors, analysts, securities regulars, company public-relations officers - and, of course, scam artists - are posting thousands of messages on dozens of discussion areas.
And news travels fast on the Internet, as the Teleglobe-Excel example shows.
Within minutes of the takeover announcement Sunday night, a Yahoo! message board devoted to Excel started to hum. Over the next two days, more than 500 messages were posted, many of them about what the wisdom of the merger and about Excel's prospects for new revenue streams from overseas.
In this instance, as in many others, the rumor-mill-inspired run-up on the stock ended in a flop. In the end, to calculate its offer,
Teleglobe used the market value of Excel before speculation sent it shooting up $5. When the Teleglobe offer was revealed,
Excel stock came tumbling back.
A lot of the information posted appears to be off the top of the writer's head.
You can't help but worry about those who are making investment decisions using only what they gather from chat rooms, where
people swap tidbits and company prospects as if they were talking about a sports team's chances for a championship. Often, it
sounds like no-holds-barred talk radio.
It's a free-for-all and it's often impossible to know who's posting because it's easy to use an alias.
Message-writers could be disgruntled employees, short-term investors hoping to temporarily inflate the stock price or insiders
eager to jack it up to make the company look better.
Or it could be dimwitted employees disclosing information before their employer have made it public. Under securities rules, public companies must disclose to all investors any information that could affect its stock price.
Securities regulators are keeping a eye on possible abuses. In December, the Alberta Stock Exchange said it was investigating
whether chat rooms were responsible for a run-up on two ASE-listed companies.
Despite all the negatives, legitimate investors who use electronic bulletin boards say they do find some useful information, along
with valuable grains of truth.
But before you start surfing these sites, it's a good idea to take a step back and learn about the dangers of gathering data online.
You'll find practical advice from the organization that regulates the Nasdaq stock exchange and from the U.S. Securities and
Exchange Commission.
Here are some of the more popular stock chat rooms:
- Yahoo! Finance Message Boards.
This huge site offers areas dedicated to 8,835 stocks, though they're not all heavily used. It also offers message boards for discussions about brokerages, initial public offerings, market trends, overvalued stocks and the dangerous world of short-term trading.
To post messages, you'll have to register. It's free. Many users lie about their identity and use free E-mail addresses from services such as Hotmail so that their identity can't be traced.
From the opening page of the Message Boards section, click on Stocks. Then, in the query box, type in the name of a public company. Say you work for SoftImage and you're wondering what people are saying about Avid Technology Inc., the company that bought out your employer on Monday.
Type in Avid Technology and presto, you have a link to the message board devoted to discussing that company. Below, there are links to messages from other boards in which Avid has been mentioned. Some discuss competition between Avid and Montreal's Discreet Logic Inc.
- Silicon Investor's StockTalk. Click on StockTalk on the opening page. From there you can either look up messages using a public company's name - or click on Talk. In the Talk section, you can read messages organized by topic or by industry. Industries range from aerospace to Year 2000. Reading the messages won't cost you anything, but only members can post. Membership, which includes access to other tools, costs $100 U.S. per year. Before you buy, take the two-week free trial offer by clicking on the opening page's Register Here link.
- Motley Fool Message Boards. Before you start, click on Read This First.
- StockChat. It's worth checking out, but be prepared to be frustrated by the confusing way in which this site displays messages. It also doesn't make it easy to find messages about a company if you don't know its stock symbol.
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