February 24, 1999
Online Trader Gets
Humbled
After Ignoring His Own Rule
By JOHN R. EMSHWILLER
Staff Reporter of THE WALL STREET JOURNAL
Less than a year ago, Gary Swancey was riding high
on the online stock-trading wave.
Under the moniker Ga Bard (he
comes from Georgia and writes
poetry), Mr. Swancey had
hundreds of people following
his Internet stock postings. The 46-year-old former
heating and air-conditioning contractor says he had at
one point turned a $20,000 stake into some $500,000
worth of securities. He even did a stint of
investor-relations work for a small company called
Midland Inc.
These days, Mr. Swancey has largely
dropped off the Internet chat circuit.
He says he has had to sell his
5,600-square-foot home, a rental
property and his 1995 black pickup
truck to pay off debts and raise cash.
Almost all his money is tied up in
Midland, whose shares -- which
were listed on the OTC Bulletin
Board, maintained by Nasdaq, for
stocks that don't qualify for Nasdaq
itself -- haven't traded since they were suspended in
August by the U.S. Securities and Exchange
Commission. The SEC has questioned Mr. Swancey
and charged two former Midland officials with
securities-law violations. An SEC official declines to
comment.
Though Mr. Swancey says he doesn't believe he did
anything wrong, he concedes, "I made a lot of
mistakes."
Mr. Swancey's misadventures are a warning to those
seeking stock-trading riches on the Internet. While
offering potentially enormous opportunities for
average investors, the Internet is also a minefield of
misinformation and temptation. It is also a place
where relative stock-trading novices such as Mr.
Swancey can quickly become celebrities with
influence and followings.
Mr. Swancey was "respected" and "known all over,"
says Mike Nichols, a former textile salesman from
Clifton, N.J., who became such an Internet trading
celebrity under the moniker Big Dog that he has
started his own online investor-relations firm.
Mr. Swancey says he ventured
into cyberspace after his
Atlanta-area heating and
air-conditioning business went
bust when hoped-for work from
the 1996 summer Olympics
didn't materialize. Retreating to
his home in Stockbridge, Ga., he
began trolling the Internet. By
early 1997, he was trading
stocks, using money from his son and his own
savings. "I figured I could make a living," he says.
Like many Internet players, Mr. Swancey was attracted
to small, obscure stocks that are often volatile. In his
first six months, he says he lost $14,000 of the
$20,000 initial stake, mostly by following the advice
of others on the Internet. "I got passed around more
than a piece of old Tupperware," he says.
Mr. Swancey says he turned things around by doing
his own stock research. His cyberspace reputation
grew. By last year, he had his own Web site, Georgia
Bard's Corner. More than 500 people had marked his
name so they would know when he posted messages
on Silicon Investor (www.techstocks.com), making
him one of the 10 most-followed names on that
popular stock-chat operation.
Mr. Swancey says his budding Internet fame helped
trip him up. "I got so busy teaching people online that
I started ignoring my own message," which included
never getting too involved in one stock, he says.
For him, the stock was
Dallas-based Midland. Mr.
Swancey says he was
attracted by the company's
capital structure, which
included preferred shares
that were each convertible
at attractive prices into 35
shares of common.
As part of his research, he
flew to Dallas to
interview company officials. He started two
stock-chat Web sites about Midland that attracted
thousands of messages. "I could quote page numbers
of the [company] filings with the SEC," says Mr.
Swancey.
Knowledge, however, didn't necessarily bring wisdom
when it came to evaluating the company's flaws --
such as its apparent difficulty deciding what to be
when it grew up. Midland news releases show that
since early 1997 the company was successively
involved in international shipping, wood products,
bearings and power transmission, software, a Las
Vegas restaurant and ethanol fuel.
A parade of top executives also passed through. One,
Mark Pierce, was sued in December 1997 by the SEC
in New York federal court for allegedly trying to
manipulate the stock price of Midland's predecessor
company. Mr. Pierce denies wrongdoing in that
pending case.
Mr. Swancey says that while such turmoil gave him
occasional pause, he kept buying stock. According to
trading records he supplied, he still holds about
10,500 Midland preferred shares, bought at from $3
to $26 each, between late 1997 and mid-1998.
In June, during a new bout of management turmoil,
Mr. Swancey did investor-relations duty for about six
weeks. He and Midland's Mr. Pierce say he wasn't
paid. Mr. Swancey says he took the job because
"everybody online was looking to me."
His move won some cyberspace kudos. "You are the
right man for the job," said one Internet posting. "The
best thing that could happen right now," said another.
Then the SEC suspended trading, citing concerns over
"the accuracy and adequacy" of information about
Midland. Midland's current chairman, Roger
Tompkins, says he is trying to get trading resumed.
(On the last day of trading, Midland common stock
traded at 32 cents a share, down from a high of about
$2.60 a share last May. Midland preferred shares last
traded at $5.)
In October, the SEC filed a still-pending suit in
Tampa, Fla., federal court against Steven A. King, a
Sarasota, Fla., operator of an Internet
stock-information Web site and a former Midland
chairman. The suit alleges Mr. King's Internet
operation "fraudulently touted" Midland and four
other small companies. Mr. King has denied the
charge.
Meanwhile, Mr. Swancey earlier this month resumed
doing investor-relations work, including operating
Web sites -- this time for about $50 an hour. So far,
he says, he is working for two small companies, one,
an environmental concern called CNH Holdings Co.,
the other, a video and general merchandise company
called Diamond Entertainment Corp. Mr. Swancey
says his compensation includes stock options with a
current market value of about $45,000. Officials at
the companies didn't return phone calls.
Despite his Midland-related woes, Mr. Swancey says
he has stayed in the business because "I have to make
a living."
But he offers cautious words to would-be Internet
traders: "Trust no one." Anyone who wants to trade
online, he adds, needs the right tools, knowledge and
discipline. "It is a vicious, vicious arena," he says. |
