Selling Short: Did Pluvia Rain On Or Rein Over Westergaard's Parade?
SHAKING the MONEY TREE 9/08/97
by Robert Metz
Metz, formerly the Market Place columnist for The New York Times, provides
his wit and wisdom on a cross section of some of the hottest stocks around.
The opinions expressed in this column are solely attributable to Robert Metz and his sources.
The "Shaking the Money Tree" column is updated every Monday evening.
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Selling Short: Did Pluvia Rain On Or Rein Over Westergaard's Parade?
Last week, I wrote about John Westergaard's campaign against "Steve Pluvia" (Latin for Rain), whose Internet writings hit Premier Laser. Premier has a laser said to whiten teeth. John Westergaard sponsors it. Westergaard writes up companies on the internet at westergaard.com. He is a veteran analyst who puts on conferences at the Waldorf for companies that he favors. Most are microcap companies, some of them start ups.
Westergaard says the Premier "disinformation" comes from a fellow who has an interest in a company with a rival technology. He offered a reward for his identify, causing an outcry from short sellers, some of whom believe non de plumes are needed due to death threats and worse. Westergaard told me he expects responsibility; balance: He does not condone stories that are too negative, a la Pluvia, nor ones that are overly bullish.
Here's word from a long-time source who has used a non de plume in stories I have done with him in the past. Serving as a journalist filter, I had justified a non de plume in his case. Pluvia had no such filter. Let's hear my old source's opposing view on the subject. I offer it in an ongoing debate in which I continue to seek various views regarding this controversial theme.
My old source is outraged by an apparent effort to "out" Pluvia. He states that he had never heard of Pluvia until he read my Premier column. His letter to me, incidentally, is expurgated to protect his identity because he is now engaged in a fight against a company he feels is led by crooks.
"Let us assume the worst -- that Pluvia has a short position in Premier and/or is in the employ of those who are short. I say, so what?
"How is that different from someone who is long writing about how great the stock is? How is that different from a person like Westergaard promoting a company? If it is not wrong for longs, why for shorts?
"I can understand that journalists such as yourself should not long or short the stocks they write about, but if that applied to the general public, all internet opinion boards would be out of business. [Then] the public would lose a great source of information about companies, uncolored by being filtered through brokerage house research departments, which are hardly a source of objective opinion.
"As to the use of a nom de plume, ("Pluvia" not being his real name) let me explain why it may be absolutely necessary. Do you remember writing a column some years ago [about a company] I had looked at very closely? I concluded [from its financial statements] that the company was cooking its books, and lying about its earnings. I posted messages to that effect on the Internet at the same site where people were touting it.
"It turned out that I was completely right. Ultimately the SEC stopped trading in the stock, the company was forced to bring in an honest accountant, the CEO was forced out, and eventually [the company] put out new financial statements that showed that it had actually been losing money all the time it was claiming great profits ... I post under my own name, and people associated with the company tracked me down. I received very authentic sounding death threats, and my office manager received numerous calls from strangers saying that he should make me stop posting. Fortunately, my boss backed me up. But if I hadn't been in a strong position in my job, it could have negatively affected my career. More important, new investors would have been taken in by this scam.
"Yes, there are honest, small companies unfairly attacked by short sellers. But many small companies are run by liars, promoters and con men who find that in a bull market cheating investors pays a lot more and has a lot less risk than other, older forms of criminal enterprise.
"But for them to make their millions, they have to keep their stock up long enough to unload their positions legally, and if that involves death threats to honest people who stand in their way, they will do it.
"I am presently engaged in a battle that is a rerun of the first one. I found a public company whose financial reports are 100% fraudulent. In addition, the crooks running it are really crooks. The CEO, I have found out, is a convicted felon with a long record, including crimes of violence. (Naturally, he didn't bother to mention this in the SEC filings.) The crooks own 75% of the stock, close to $30 million dollars worth, that will be worth nothing when the SEC gets off its ass and closes this scam down. You don't have to see many movies to know that people kill for a lot less.
"In the meantime, I am keeping the pressure on, letting anyone who checks the Silicon Investor website know why this company is a fraud. I am confident that this company will not be able to determine where I live. But Westergaard, who offers rewards for the home address and other personal details of the individual posting under the name `Steve Pluvia' could put that man's life in danger or anyone else in a similar situation.
"Because that is what we are talking about. Bill Gates doesn't care who criticizes Microsoft. Real companies don't care about short sellers -- they just run their companies right and let the stock price take care of itself. In my experience, it is only those companies with something serious to hide that are worried about short sellers.
"You may think I am making too much of this, but I still remember very clearly being threatened. It was not fun. Thanks for hearing my rant." Please note that your author does not own stocks and does not sell them short. The last stock I owned was that of Financial News Network and a subsidiary and, before that of the The New York Times. I was working at each of those companies and got the stock through options.
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