Presstek lawsuit emphasizes importance of skepticism
by Scott Bernard Nelson
Last Updated: Friday, September 19, 1997 5:04 p.m. EST
Don't believe everything you read in the online chat areas dedicated to "stock talk," a New Hampshire printing-press maker reminded Web surfers this week.
Presstek, Inc., of Hudson, N.H., filed a lawsuit accusing three men of using online bulletin boards to intentionally drive down its stock price. The lawsuit claims the men spread allegations that Presstek was the subject of a grand jury investigation, that it was losing money during various reporting periods and that an internal auditor was about to resign—all false, the company says.
Presstek says Mark Hollingsworth of Hampton, Va., Ivan Lustig of Greenwood, Colo., and Parag Patel of Hamilton Square, N.J., were short sellers of the company's stock, which trades on the Nasdaq exchange. Short sellers profit when a stock price drops, so Presstek lawyer Robert McDaniel says the trio had incentive to spread damaging lies about the firm.
"We'd like to have a lot of speech about our company [in the investment chat areas]," McDaniel says. "We only ask that people tell the truth."
Hollingsworth, Lustig and Patel all say they will fight Presstek's lawsuit. They don't deny posting the messages or selling Presstek's stock short, but they say the opinions they championed amount to Constitutionally protected free speech.
The federal court in Concord, N.H., will decide whether that's true. In the meantime, though, users of the online chat areas are left wondering: Who in the online world can you believe?
The quick answer is nobody, says Chris Johnson of Vector Internet Services in Minneapolis. A veteran of two decades working on the various evolutionary stages of the Internet, Johnson says the medium's anonymity makes it a fertile breeding ground for people out to make a quick buck at your expense.
"When people are not dealing face-to-face with others, they're much more likely to lie," Johnson says. "The stock advice you get [in the online chat areas and bulletin boards] is worth exactly what most people pay for it—nothing."
But the Web can be a fabulous source of information for some things, such as the latest quarterly statements from a company or even investment advice. The trick is to approach online stock tips with the same skepticism you would if you heard them from a stranger at a cocktail party.
For more information and links to some of the more popular investment bulletin boards, read "Safe Surfing: Don't Trust, Verify" from the November issue of Kiplinger's Personal Finance Magazine.
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