GaBard-> Cyberburned: Saga of a Humbled Online Trader
By JOHN R. EMSHWILLER
Staff Reporter of THE WALL STREET JOURNAL
February 24, 1999
& Author of "Scam Dogs and Momo Mamas"
Online Trader Gets Humbled After Ignoring His Own Rule
Less than a year ago, Gary Swancey was riding high on the online stock-trading wave. Under the moniker Ga Bard (he comes from Georgia and writes poetry), Mr. Swancey had hundreds of people following his Internet stock postings. The 46-year-old former heating and air-conditioning contractor says he had at one point turned a $20,000 stake into some $500,000 worth of securities. He even did a stint of investor-relations work for a small company called Midland Inc.
These days, Mr. Swancey has largely dropped off the Internet chat circuit. He says he has had to sell his 5,600-square-foot home, a rental property and his 1995 black pickup truck to pay off debts and raise cash. Almost all his money is tied up in Midland, whose shares -- which were listed on the OTC Bulletin Board, maintained by Nasdaq, for stocks that don't qualify for Nasdaq itself -- haven't traded since they were suspended in August by the U.S. Securities and Exchange Commission. The SEC has questioned Mr. Swancey and charged two former Midland officials with securities-law violations. An SEC official declines to comment.
Though Mr. Swancey says he doesn't believe he did anything wrong, he concedes, "I made a lot of mistakes."
Mr. Swancey's misadventures are a warning to those seeking stock-trading riches on the Internet. While offering potentially enormous opportunities for average investors, the Internet is also a minefield of misinformation and temptation. It is also a place where relative stock-trading novices such as Mr. Swancey can quickly become celebrities with influence and followings.
Mr. Swancey was "respected" and "known all over," says Mike Nichols, a former textile salesman from Clifton, N.J., who became such an Internet trading celebrity under the moniker Big Dog that he has started his own online investor-relations firm.
Mr. Swancey says he ventured into cyberspace after his Atlanta-area heating and air-conditioning business went bust when hoped-for work from the 1996 summer Olympics didn't materialize. Retreating to his home in Stockbridge, Ga., he began trolling the Internet. By early 1997, he was trading stocks, using money from his son and his own savings. "I figured I could make a living," he says.
Like many Internet players, Mr. Swancey was attracted to small, obscure stocks that are often volatile. In his first six months, he says he lost $14,000 of the $20,000 initial stake, mostly by following the advice of others on the Internet. "I got passed around more than a piece of old Tupperware," he says.
Mr. Swancey says he turned things around by doing his own stock research. His cyberspace reputation grew. By last year, he had his own Web site, Georgia Bard's Corner. More than 500 people had marked his name so they would know when he posted messages on Silicon Investor (www.techstocks.com), making him one of the 10 most-followed names on that popular stock-chat operation.
Mr. Swancey says his budding Internet fame helped trip him up. "I got so busy teaching people online that I started ignoring my own message," which included never getting too involved in one stock, he says.
For him, the stock was Dallas-based Midland. Mr. Swancey says he was attracted by the company's capital structure, which included preferred shares that were each convertible at attractive prices into 35 shares of common.
As part of his research, he flew to Dallas to interview company officials. He started two stock-chat Web sites about Midland that attracted thousands of messages. "I could quote page numbers of the [company] filings with the SEC," says Mr. Swancey.
Knowledge, however, didn't necessarily bring wisdom when it came to evaluating the company's flaws -- such as its apparent difficulty deciding what to be when it grew up. Midland news releases show that since early 1997 the company was successively involved in international shipping, wood products, bearings and power transmission, software, a Las Vegas restaurant and ethanol fuel.
A parade of top executives also passed through. One, Mark Pierce, was sued in December 1997 by the SEC in New York federal court for allegedly trying to manipulate the stock price of Midland's predecessor company. Mr. Pierce denies wrongdoing in that pending case.
Mr. Swancey says that while such turmoil gave him occasional pause, he kept buying stock. According to trading records he supplied, he still holds about 10,500 Midland preferred shares, bought at from $3 to $26 each, between late 1997 and mid-1998.
In June, during a new bout of management turmoil, Mr. Swancey did investor-relations duty for about six weeks. He and Midland's Mr. Pierce say he wasn't paid. Mr. Swancey says he took the job because "everybody online was looking to me."
His move won some cyberspace kudos. "You are the right man for the job," said one Internet posting. "The best thing that could happen right now," said another.
Then the SEC suspended trading, citing concerns over "the accuracy and adequacy" of information about Midland. Midland's current chairman, Roger Tompkins, says he is trying to get trading resumed. (On the last day of trading, Midland common stock traded at 32 cents a share, down from a high of about $2.60 a share last May. Midland preferred shares last traded at $5.)
In October, the SEC filed a still-pending suit in Tampa, Fla., federal court against Steven A. King, a Sarasota, Fla., operator of an Internet stock-information Web site and a former Midland chairman. The suit alleges Mr. King's Internet operation "fraudulently touted" Midland and four other small companies. Mr. King has denied the charge.
Meanwhile, Mr. Swancey earlier this month resumed doing investor-relations work, including operating Web sites -- this time for about $50 an hour. So far, he says, he is working for two small companies, one, an environmental concern called CNH Holdings Co., the other, a video and general merchandise company called Diamond Entertainment Corp. Mr. Swancey says his compensation includes stock options with a current market value of about $45,000. Officials at the companies didn't return phone calls.
Despite his Midland-related woes, Mr. Swancey says he has stayed in the business because "I have to make a living."
But he offers cautious words to would-be Internet traders: "Trust no one." Anyone who wants to trade online, he adds, needs the right tools, knowledge and discipline. "It is a vicious, vicious arena," he says. |
