Taking the corporate battle to the chat sites
Totally Hip Software Inc THW
Shares issued 14,109,857 Dec 4 close $0.80
Fri 4 Dec 98
CEO GOES ON LINE TO COUNTER 'BULL' ABOUT COMPANY
One of the better known - and in some quarters, one of the least liked -
posters on Internet financial discussion forums is a persistently skeptical
participant called "lentils."
If lentils's purpose is to gain a reaction from the companies in question,
then he or she has found great success with his statements about
Vancouver-based Totally Hip Software. Totally Hip's response was scathing.
Chief executive officer Randall McCallum calls lentils a "malicious and
self-righteous individual who shows no regard for what is right and wrong."
Mr. McCallum has not taken the ultimate step of going to court. He has,
however, contacted both StockHouse and Stockwatch to complain that lentils
is upsetting a number of shareholders. These shareholders apparently call
Mr. McCallum frequently to complain about lentils's attacks. While at
StockHouse's office, which is located in the same office building as
Totally Hip's, Mr. McCallum was told by an employee that StockHouse does
not give out poster identities unless compelled by authorities.
Clearly, senior management at Totally Hip has spent a lot of time agonizing
about lentils and another on-line critic, Susan Varga, whom Mr. McCallum
suspects is lentils using other handle.
Mr. McCallum complains that lentils has called a former officer of the
company a child molester, that he or she has referred to Totally Hip as the
latest Canadian "scam," that the company pays for complimentary editorial
coverage, that Totally Hip was named in the StockDetective's "stinky stock"
site, and that the company is involved in such dubious practices as paying
for newsletter buy recommendations without disclosing the nature of the
relationship.
LIBEL UNCLEAR
In spite of Mr. McCallum's contention that lentils's posting history would
reveal him as someone who lies, misinforms and libels, it is unclear what
it is about the postings of lentils and Ms. Varga that has Totally Hip's
management in such a frazzle. For instance, Mr. McCallum did not produce
evidence that a former officer was referred to as a child molester, nor was
any reference cited indicating he or she said the company was a scam.
A read of these discussion sites indicates Totally Hip should probably be
more concerned about flagrant touting and hyping. Mr. McCallum says he does
not like the unsubstantiated hype, either, but it is clear that he and his
company are far more concerned with negative comments.
On Oct. 5, lentils posted on StockHouse that two newsletters that covered
Totally Hip in a favourable fashion formed part of a list in the
StockDetective website as letters that accept compensation for coverage.
These are Data News Group and the "McDo" letter by Mitch McDougherty of
something called Mitch McDougherty and Associates Stock Investments. During
the summer Data News gave the stock, then trading in the 80-cent range, a
six-month target price of $15.
While it is true that neither McDo nor Data News appears in the
StockDetective site of newsletters to be wary of, there is no evidence that
lentils said Totally Hip had been named to the "stinky stock" list.
Mr. McCallum denies the company has ever paid any group for favourable
coverage, but concedes he has met with representatives of Data News. "A
bunch of people came in here," he says. "They don't really tell you who
they are and they want to do some due diligence on the company and then
about a week later what happens, you go out there and all of a sudden (the
coverage is posted on the Internet), so people ask us to respond to these
things."
Data News does not have a website, nor does it appear to give out its
physical address or phone number, but a posting of its e-mail address
indicates it is or was in British Columbia (datanews@intergate.bc.ca). In
spite of an outright denial by Totally Hip of payment for recommendation,
the mystery surrounding the organization provided Ms. Varga with fodder for
suggesting there may indeed be a mutually beneficial arrangement between
Totally Hip and Data News. "Randy, maybe when you are able to post you
could comment on why you think this Data News Group, who sends out a free
newsletter and has no relationship with Totally Hip, is making such efforts
to promote the company? I don't think I've ever seen such a thing before,"
she commented on Aug. 10. "It is obvious to anyone who has received these
letters that all other picks . . . were pump-and-dump plays."
Totally Hip was also given a gushing recommendation by Internet tout-sheet
author Danny Deadlock. After interviewing president Brian Leeners, Mr.
Deadlock writes that the company spends far too much of its time with the
business of software and not enough time promoting its shares. "I honestly
believe these guys will not only do well in the Internet market but the
odds of a buyout in the future is quite high," he advises in a "private
communication" on the Internet, mentioning Corel Corp. several times.
APOLOGY DEMANDED
In a lengthy and rambling post the next day, Mr. McCallum distanced his
company from Data News, and insisted Ms. Varga owed him an apology for
misquoting him. "Perhaps she would like to directly challenge me about my
integrity and character?" he posted. "I am one tough SOB and I don't take
bullshit comments lightly from anybody, period. No, I don't endorse any
news group."
Earlier this month Mr. McCallum was enraged by a suggestion from lentils
that favourable coverage on a Nova Scotia-based Macintosh information site
called MacCentral was an editorial-for-advertising arrangement. "How much
does Totally Hip 'pay' to be featured on MacCentral?" asked lentils in a
posting on BOBz on Oct. 31, pointing out that the company was listed as a
MacCentral advertising sponsor in the site.
Both Mr. McCallum and officials at MacCentral vehemently deny such a
practice takes place. Mr. McCallum says he is a strong supporter of the
service provided by MacCentral and that Totally Hip simply advertises,
modestly, on the site.
Mr. McCallum was also upset about a Silicon Investor post by Ms. Varga in
mid-August that included the company's 1998 first-quarter financial results
which ended Dec. 31, 1997. The CEO said he was angered because when the
financials were lifted from the official SEDAR site, the formatting was
lost and that the numbers wrongly arranged in the resulting post. Mr.
McCallum conceded he had no reason to believe the numbers were tampered
with, however.
"This stuff was a mess," Mr. McCallum says of the resulting post. "Her
objective was to start a fight."
The offending post has been removed, according to Mr. McCallum at the
request of Ms. Varga who knew it was incorrect. In the post Ms. Varga was
apparently making the point that Totally Hip's stated net income of
$1.77-million was more realistically a loss of $122,461 that was mitigated
by the company's other income - a gain on sale of software of $1.9-million
- stemming from a $10-million tax-driven software sales agreement with
Columbia Diversified Software Fund Ltd. That deal was announced on Nov. 25,
1997 |
