I'm now a happy share holder of Financial web.com. As a result of earlier trading gains, I plan to purchase a significant amount of the stock.
I won't mind if the stock trades at zero. Could call in the certs.
Does not look good...:
Oct 18,2000
In the End, a Scam Is Killing
FinancialWeb's Stock Detective
By Aaron Elstein
WSJ.com
Investors and securities regulators may lose an important Internet ally in the fight against penny stock fraud.
FinancialWeb.com , an online provider of investing tools and information, warned this week that it may soon shut down. Like many dot-com upstarts, the company is facing a cash crunch.
The Altamonte Springs, Fla., company is best known for its online newsletter Stock Detective, which ferrets out possible stock scams on the Internet. It was one of the first Internet publications to wage war against online stock fraud.
Stock Detective publishes a list of "stinky stocks," or small stocks that it believes are being pumped up on the Internet by unscrupulous promoters. These promoters usually lure unsuspecting investors to a stock then dump their shares at a profit when the price surges to an artificially inflated level.
The newsletter has been credited with helping securities regulators, hamstrung by scarce resources, battle an explosion in online stock fraud that accompanied the dramatic growth in investing by average investors.
"We found Stock Detective to be quite informative and a good source of leads for us," said Marc Crandall, lead counsel with the California Department of Corporations' Internet Enforcement Division.
Ironically, FinancialWeb President Lysle Wickersham said the company's demise is related to an alleged stock-fraud scam involving its top shareholder, Glenn B. Laken, a Chicago commodities trader who owned a 15.7% stake in the company. Mr. Laken was indicted June 14 in New York on federal charges that he attempted to manipulate FinancialWeb's stock. Mr. Laken's lawyer, Gerald Lefcourt, said he expects his client to be vindicated in a trial, which isn't expected to start before next September in U.S. District Court in New York.
Even though neither FinancialWeb (www.financialweb.com ) nor its executives were named in the case, "The indictment was not a good event for the company," Mr. Wickersham said Monday.
Mr. Wickersham said the indictment devastated FinancialWeb's stock and destroyed the company's ability to raise financing. The stock slumped to $3.50 from $8 immediately after the indictment was announced and has fallen steadily ever since, dropping to 6 cents Tuesday on the OTC Bulletin Board, which is run by the National Association of Securities Dealers.
FinancialWeb disclosed its precarious situation in a filing Monday with the Securities and Exchange Commission. It said it has depleted its cash reserves and "has been unable to arrange financing on satisfactory terms." It said its chief executive, Kevin Leininger, would resign immediately; and it also laid off all but seven of its 38 employees.
Mr. Wickersham said the remaining employees would continue "minimal operations" and "ensure an orderly transition," which would mean winding down the company's affairs unless there is an immediate cash-infusion. FinancialWeb, in its SEC filing, said it is also pursuing other strategic alternatives, including the possible sale of the company.
FinancialWeb's financial difficulties aren't unusual at a time when most investors are shunning Internet-related stocks, especially the more speculative issues quoted on the Bulletin Board. The company has long had difficulty generating sufficient revenue to support its operations.
Starting in 1997, FinancialWeb attempted to shed some light on the market's murkier corners by unveiling Stock Detective. Run by former Financial Web Chief Executive Kevin Lichtman, a former stock promoter, the site was one of the first publications to challenge the claims of promoters who were starting en masse to use the Internet to hype stocks.
In addition its stinky-stocks list, Stock Detective rates how well stock promoters complied with SEC requirements that they disclose fully their compensation and involvement with the companies they were promoting. It also advised readers how to spot potential online stock-fraud schemes.
Investor enthusiasm for the site, combined with the mania for most any Internet-related issue at the time, helped drive FinancialWeb's stock price to as high as $27.75 in January of 1999.
"I knew the business and wanted to share what I knew about promotion with investors new to penny stocks," says Mr. Lichtman, who was ousted last October in a management shake-up. "We had a lot of fun and got a great reception."
The company, which generated revenue from advertising on its Web site, reported a loss of $57.9 million, or $10.84 a share, in 1999 on revenue of $446,000. Its accountant, Deloitte & Touche, warned that there was substantial doubt FinancialWeb could continue unless it raised more capital.
After Mr. Lichtman's ouster, Stock Detective went dormant as new management tried to revamp the company's business plan, but the losses continued. The company posted a loss of $10.8 million, or $1.39 a share, in the first six months of this year, on revenue of $491,000.
The new management team's efforts to turn around the company were short-circuited when federal prosecutors revealed that the stock manipulation that Stock Detective warned people about in other companies could be taking place in its own backyard.
According to the six-count indictment in June, Mr. Laken bribed a stock broker to pitch FinancialWeb's stock and paid promoters to tout the stock on Web sites they controlled.
Nevertheless, while FinancialWeb's situation is precarious, there is a ray of hope for its online newsletter.
Bob Davis, a Springfield, Pa., financial-newsletter writer who exposes "Suspicious Stocks," said he would be interested in acquiring the Stock Detective name from FinancialWeb and would continue to publish under that banner.Write to Aaron Elstein at aaron.elstein@wsj.com |
