DAYTRADERS BEWARE!!!
DISCLAIMER>>Not intended for serious TMCS investors...smoochies
I am posting this as this has happened to TMCS before as mentioned in article and I believe we are still victims of this type of bashing and we all know who and why...
Pitfalls Abound For Hyperactive Day Traders
By Larry Barrett, ZDII
April 8, 1999 9:26 AM ET
If you want to be a day trader, you better be prepared for the unexpected. A series of pranks, negative message board postings and flat-out innocent mistakes have caused the fortunes of some stocks to rise and fall for no good reason.
Call it the price one must pay to play in the Internet Age.
With Internet stocks bouncing up and down in double-digits in just a few seconds, online investors are starving for the fastest sources of news around. For better or worse, they usually turn to online publications which are inherently vulnerable to the whims of hackers and professional scam artists alike.
The latest example came Wednesday when someone posted a phony press release on the Web. Though the posting only appeared on Yahoo! and Bloomberg.com, the impact on PairGain Technologies stock was undeniable.
The bogus press release, which was a passable counterfeit of the real deal, claimed PairGain Technologies (Nasdaq: PAIR) would be acquired by ECI Telecom Ltd. (Nasdaq: ECILF) for $1.35 billion.
To the untrained eye, the release might have looked legit.
Greed can make fools of us all.
Soon, PairGain shares shot up from an opening price of 8 17/32 to 11 1/8 with more than 12.1 million shares changing hands.
Even professional market watchers were briefly sucked in by the sham.
"I got a call from a friend saying there was a release out that PairGain was going to be bought at around $18 a share," said John Todd, an analyst at C.E. Unterberg, Towbin. "So I checked the price and saw that it was still $7 to $8 below the alleged purchase price. Even though it smelled fishy, the greed element began to overpower logic."
Assuming the false release was true, PairGain shares would have raced up to at least $18 a share based on the phony purchase price. Since the stock was hovering at only 11 and change, it immediately became obvious that something was amiss.
Todd said he called PairGain CFO Charles McBrayer to get to the bottom of the suspicious press release.
"He told me there was absolutely no truth to it and he had no idea who put it out there," Todd said. "But to someone who's day trading or doesn't really investigate a release like that, it would be too late."
In fact, some investors might not even realize it's a hoax yet.
PairGain shares closed up 7/8, or 10 percent, to 9 3/8 even after the bogus release was identified by analysts and PairGain officials.
Innocent mistakes count too
Who can forget the debacle that unfolded in December when several news sources, including Reuters, Yahoo! Finance and ZDII mistakenly identified Ticketmaster-CitySearch Inc.'s (Nasdaq: TMCS) ticker symbol as "TMCO."
It got ugly because that day TMCS held its initial public offering.
As a result, thousands of day traders relying on the information they received from online sites bid up Temco Services Industry Inc. (TMCO) in the opening half-hour of trading. Temco's stock nearly tripled from 13 < to 42 before the error was discovered.
If you happened to hold Temco before things went awry and checked your stock that morning, you probably would have sold it in a hurry.
Temco's shares immediately retreated to their original price but the damage was done. Investors who thought they'd purchased Ticketmaster-Citysearch at $20 or $25 a share had to sell their unwanted Temco holdings and get back into Ticketmaster-Citysearch at a much higher price.
Other mistakes have been made with similar ticker symbols including Tele-Communications Inc. (Nasdaq: TCOMA) being confused with Transcontinental Realty Investors Inc. (NYSE: TCI).
Message board sabotage
Another problem spot can be found on virtually any message board site on the Web. Ostensibly used for entertainment purposes, some investors have found these boards to be a little gold mine of information about stocks.
Of course, most of the information is posted anonymously and is usually rife with inaccuracies.
Software developer Phoenix International Ltd. (Nasdaq: PHXX) filed a suit last month against seven unidentified people who wrote critical comments about the company on an Internet message board.
Phoenix International Ltd. claims the rumors on the message board operated by Yahoo! defamed the company and caused its stock price to dip.
Phoenix has issued subpoenas for Yahoo! records, demanding that the company disclose the names of the chat-room participants. Bahram Yusefzadeh, the company's chairman and chief executive, said Yahoo! was cooperating fully, although the individuals haven't yet been identified.
Some of the messages, many of which are critical of Yusefzadeh, appear to be employees and former employees, the chairman said Tuesday.
For example, someone using the moniker ''johnboscarelli'' posted messages on Feb. 9 and 16 that said, ''not a single ex-manager from the company is on speaking terms with this Yusefzadeh character'' and ''the CEO isn't too sharp technically, has a huge ego and has a well-earned reputation for dealing dishonestly with his managers and business partners.''
During the past 2 1/2 months, senior company officials have spent ''enormous amounts of time'' defending the company from negative rumors, Yusefzadeh said.
Phoenix shares closed off 1/8 to 4 5/8 Wednesday after hitting a 52-week high of 21 and change.
Robert V. Bolen, an analyst with J.C. Bradford & Co. in Nashville, Tenn., said the negative chat had damaged the company.
The stock lost one-third of its value on Jan. 13, when the company announced its fourth-quarter earnings would be 9 cents a share, less than half of the 20-cent projection.
But the stock has continued to slide since then, and there has been no other reasonable explanation, Bolen said.
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