And you're Public Enema # 1. Here is what real "DD" is all about, read it and live it!: "How to Evaluate Investor Web Sites: Personal Wealth
Los Angeles, March 2 (Bloomberg) -- Folks have access to more investment information than ever because of the
Internet, and more misinformation as well. Therefore, individuals must be able to evaluate the credibility of what they
are reading on investor- oriented Web sites to avoid making misguided decisions.
This is especially so as more investors trade on line and use no-frills brokers without the benefit of a trusted financial
adviser to guide them.
On the Internet, an anonymous poster in a RagingBull.com chat room may sound just as authoritative as a report from
a respected news organization or a professional investment analyst. ``There's something about seeing it on a screen that
gives it instant credibility,' said Bill McDonald, head of the California Department of Corporation's enforcement
division.
To determine the value of information on the Web, you should consider what might bias the author's message. How is
the writer being compensated? Does he own shares in the company? Is she a professional journalist? Do you even
know who the writer is?
``I wonder how many chat room participants realize that if someone is waxing poetic about a certain stock, that person
could well have been paid to do it?' asked Arthur Levitt, chairman of the Securities and Exchange Commission, in a
speech to investors in Los Angeles last month.
Publicly owned companies maintain Web sites, issue press releases and file reports with the SEC. If companies are
untruthful, the SEC can halt trading in their shares and they can be sued for fraud. But not even SEC filings are
infallible.
Check Multiple Sources
``We can't guarantee the accuracy of reports filed with us,' said John Gannon, acting director of the SEC's office of
investor education. He urges investors to check multiple sources before making an investment decision.
For some companies issuing a press release is a daily event, no matter how inconsequential the news. Investors ought
to be wary of companies that seem to devote more energy to issuing press releases than conducting their business.
Scan the company's announcements from 12 months ago. Did the exciting new product announced then ever reach the
market, or was it just hype?
PR Newswire and Business Wire carry company press releases. Some investors mistakenly believe these wires are
news organizations. They aren't; their business is distributing announcements drafted by companies.
Record of Conviction
Information on a company's Web site is only as reliable as the company. Last summer, Uniprime Capital Acceptance,
a used car dealer, said it had discovered a new treatment for AIDS. Uniprime shares quadrupled after chat room
postings directed investors to the company's Web site where it posted what it claimed were patient testimonials. Then it
was reported the 'doctor' behind the breakthrough wasn't really a physician -- he was a felon, convicted of a
conspiracy to commit murder. The stock price collapsed.
Occasionally, a company's Web site will contain misleading information unbeknownst to its webmaster.
The Web site maintained by Aastrom Biosciences Inc. announced it was merging with Geron Corp. last month. Its
shares rose briefly before the companies denied they were getting together. A hacker had entered the site and posted
the false information.
News organizations like Bloomberg, Reuters, and Dow Jones review the contents of press releases, SEC filings and
information gathered from their own reporting, and write stories based on their independent judgments about
newsworthiness. Many news organizations, including Bloomberg, prohibit reporters and editors from investing in
companies they cover.
In Tiny Print
Third parties, including brokerage firms and stock picking services, often have a vested interest in their
recommendations. The SEC requires brokers and stock pickers who have been paid by the company to disclose their
conflicts. It may be in tiny print, though, buried deep inside a report.
Third party press releases about a company should be scrutinized carefully by investors. Ask yourself why someone is
spending money to disseminate this information. There's a good chance they already have a position in the stock.
Get stories directly from the Web site of the news organization that produces them. That way, you can be certain the
story isn't a forgery.
Last April, a PairGain Technologies Inc. engineer, Gary Hoke, posted a link to a bogus news story he created that said
his employer was being acquired by an Israeli company. The story was crafted to appear that it came from the
Bloomberg News Web site. The shares rose as much as 31 percent after he posted a link to the phony site on a
message board. Hoke, of Raleigh, North Carolina was fined $93,000 and sentenced to six months of house arrest.
Anonymous Authors
Many investors find ideas by reading messages posted on popular stock bulletin boards like RagingBull.com,
Yahoo.com and Techstocks.com. The boards can be entertaining, and a place to scout out stocks for further research,
regulators say. But they're not a place to gather accurate information. ``They're unreliable, and often irresponsible,' said
McDonald at the California Department of Corporation.
Tens of thousands of messages are posted daily. The authors of almost all these messages hide their true identities
behind pseudonyms, or 'handles.' Takeover tips are a popular subject on the boards.
``I have been hearing that NEIP stock will be bought out by a wireless firm this coming week,' wrote a poster calling
himself Green_matter on Raging Bull on Nov. 13. At first, the posting seemed insightful. Shares of NEI Webworld
Inc., the bankrupt commercial printing company soared from their 13 cent close the day before to a high of $15.31 on
the next trading day. Then they collapsed to 37 cents.
Fifty Names
A month passed before investors learned the identity of ``Green_matter.' That's when federal prosecutors in Los
Angeles charged three men, including Green_matter, with stock manipulation. They'd allegedly used 50 aliases to send
messages to 500 Internet bulletin boards, touting a bogus takeover rumor about NEI.
Occasionally, authoritative information makes its first appearance on a bulletin board. Last July, a posting on Ragingbull
announced trading had been halted in Uniprime, the company with the bogus AIDS treatment. That was the same place
where bullish postings had sent its shares through the roof.
The name of the poster was SECEnforcement, the handle sometimes used by attorneys at the SEC. The agency had,
indeed, halted trading in the stock. And its enforcement division announced the halt in the same place where many
now-remorseful investors did most of their research on the stock.
Stock News Web Sites: www.bloomberg.com www.reuters.com/news/ www.dowjones.com
Web Sites With Press Releases: www.prnewswire.com www.businesswire.com
SEC web site, including company filings on EDGAR: www.sec.gov
Mar/03/2000 14:50
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