Bill, job competition! I know not how you can withstand it, but for a traffic engineer every person with a driver's license is seen as his competition. Like wise, every person who bought a stock in the last 3 years or has a web-site is your competition now! -g-
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September 29, 1999
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Firm Bullish on EquityAlert
Is Run by a College Student
By AARON ELSTEIN
THE WALL STREET JOURNAL INTERACTIVE EDITION
Small companies are complaining all the time that their stock prices are depressed because brokerage-firm analysts ignore them.
But three small companies don't have to worry about that. They've gotten flattering attention lately, from the same commentator. All the companies also have the same chairman. The story gets a bit complicated from there.
But the lesson to investors is: Know your analyst, or his firm, before snapping up a stock he's recommending.
It starts with EquityAlert.com (www.equityalert.com), a financial information Web site, which saw its shares more than double this month when it issued a news release that included a bullish assessment of the company by one Mandeep S. Virdee.
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"We believe EquityAlert.com to be grossly undervalued, representing immediate opportunity for the aggressive investor," Mr. Virdee, identified as an analyst at Oxford Barnes Equities Ltd. in London, was quoted as saying. He predicted EquityAlert, based in Scottsdale, Ariz., would grab the largest market share among financial sites and suggested it could become a takeover target.
The release, made to announce that the free Web site had reached 120,000 registered users, didn't provide any background information on Mr. Virdee or Oxford Barnes, and in an interview EquityAlert's chairman, Harmel S. Rayat, described Oxford Barnes as "a small brokerage firm." As it turns out, Mr. Virdee is a 22-year-old university student and Oxford Barnes is a one-man operation he runs in his spare time.
Mr. Virdee, in a telephone interview, said he is a financial management student at De Montfort University in Leicester, England. He says he started Oxford Barnes by himself about a year-and-a-half ago as a public-relations firm. But the rise of the Internet forced him to change course -- it "has thrown me a curve," as he put it -- and he's now planning to start a Web site that will list the companies he writes about.
He acknowledges lacking analyst credentials. "I'm passing along commentary to companies," he says. "I have never claimed to offer investment advice. It is up to the companies to do with it what they will. I've never said I'm credentialed to be an analyst."
That's not the way EquityAlert positioned Mr. Virdee in its press release, in which it called him an analyst and presented his opinions under a heading that read: "Oxford Barnes begins research coverage." In an interview earlier this month, Mr. Rayat explained that EquityAlert had highlighted the comments from Oxford Barnes because, "We can't get coverage from places like Goldman Sachs because we're a startup."
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Mr. Rayat didn't respond to messages this week on the matter.
Mr. Virdee says he first encountered Mr. Rayat about two years ago, when he called for information about another firm Mr. Rayat runs. Mr. Virdee says Oxford Barnes "is not a brokerage firm, and anyone who says that is totally wrong."
Investors who may have sought information about Oxford Barnes after EquityAlert's press release would have been frustrated. The company has no telephone listing in London and British regulators say they have no record of the firm. Moreover, two organizations that monitor British analysts say Mr. Virdee isn't among their members.
Stuart Valentine, director of membership at Securities Institute, says it has no record of Mr. Virdee passing its "registered persons exam," which Mr. Valentine says individuals in the United Kingdom must complete before advising customers on securities. A person in the press-relations office of the Institute for Investment Management and Research, which administers a second exam for brokerage-firm analysts required by British regulators, says Mr. Virdee isn't one of its 4,500 members.
Mr. Virdee says that while he isn't registered with British authorities, he believes he doesn't need to registered because he isn't disseminating information to British clients or clients in European Union-member countries. He says he has not seen the EquityAlert.com report, but after being read portions of it, says "the spirit appears to be correct" to how he feels about the company. "Their growth in subscribers really is remarkable," he says.
Since December, two other companies have issued news releases that include bullish comments attributed to Oxford Barnes: MedCare Technologies, an Oak Brook, Ill., company that is developing a treatment for urinary incontinence and other things, and WhatsOnline.com, a Richmond Hill, Ontario, concern (www.whatsonline.com) that provides audio and video over the Net. Mr. Rayat is chairman of both companies.
In a WhatsOnline news release issued in April, Mr. Virdee predicted that WhatsOnline, which was known at the time as American Alliance Corp., could reach $85 a share, giving it a total market value of more than $1 billion. The shares were quoted at $1.3125 on the National Association of Securities Dealers' OTC Bulletin Board on Wednesday.
EquityAlert's shares, which are also quoted on the OTC Bulletin Board, jumped to $8.1875 on Sept. 2 from $3.875 just two days earlier, when EquityAlert's news release was issued. The stock has retreated from that spike and was quoted at $3.5625 Wednesday.
Both Mr. Rayat and Mr. Virdee say that Oxford Barnes wasn't paid to provide research on EquityAlert, MedCare or WhatsOnline.
EquityAlert.com's site offers a variety of financial information, including delayed stock quotations and commentaries that aim to explain sharp movements in stocks. The company says it receives no compensation for the companies it writes about, nor does it invest in stocks. It currently doesn't run any advertising.
The site has gotten attention by issuing hundreds of news releases called "investment opinions" over the past four months. These are not stock recommendations, but rather lists of stocks that were mentioned on the EquityAlert site or chosen in a stock-picking contest it runs. Because the news releases contain many companies' name and symbols, the releases frequently show up in searches of news databases.
Mr. Virdee, in EquityAlert's Aug. 31 press release, said the company's shares were worth $20 based on its business prospects. He said he expects EquityAlert to capture the largest market share of any financial Web site, "making it a potential target for an E*Trade or other financial-services company looking to quickly acquire market share or customers." An E*Trade spokesman says the company was "not aware" of EquityAlert.
Mr. Virdee, in the press release, went on to compare EquityAlert.com to TheStreet.com. He said TheStreet.com had a market value of $451 million, or $6,833 per subscriber and said that based on EquityAlert.com's larger subscriber base, its market value should be $820 million. TheStreet.com has 90,000 subscribers who pay up to $9.95 a month, which helped it generate $3.3 million in revenue for the quarter ending June 30.
In a filing with the U.S. Securities and Exchange Commission, EquityAlert said it hasn't generated any revenue from operations since its inception, and it expects "minimal, if any, revenues" through the end of 1999 as it develops its Web site and subscriber base. It reported a loss of nearly $28,000 in the first half of 1999.
In its SEC filing, EquityAlert said that its accountant, Clancy & Co. of Phoenix, believes that there is "substantial doubt" that the company can "continue as a going concern." EquityAlert said it is spending $30,000 per month and has $900,000 in cash, which it believes is enough to fund |
