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Pastimes : Investment Chat Board Lawsuits -- Ignore unavailable to you. Want to Upgrade?

To: rrufff who wrote (7247)	2/11/2005 1:14:49 AM
From: Kevin Podsiadlik	Read Replies (1) \| Respond to of 12465

Is NovaStar's dividend at risk? Commentary: More Overstock, naked shorting By Herb Greenberg, MarketWatch marketwatch.com ...(excerpt follows)... To tell the truth: Naked short-selling has been an enigma on Wall Street for decades, but this you can count on: When companies with fundamental flaws come under fire by short-sellers, they frequently cry they're the victim of not just regular short-sellers, but naked shorts -- people who illegally short a stock by borrowing shares that don't exist. Short-selling involves borrowing shares, selling them and then buying them back and delivering them to the rightful owner at a lower price -- assuming all goes according to plan. Naked shorting has been a focus of regulators for years. But lately that fight has become a rallying point for investors in NovaStar. The leader of the fight, a NovaStar investor, runs what he claims to be an independent Website for NovaStar investors. He operates under a pseudonym and brags about going to great lengths to avoid telling anybody who he is or anything about his expertise on companies like NovaStar. (More about that in a minute.) Then, out of the blue, he appeared two weeks ago on Overstock.com's (OSTK: news, chart, profile) conference call, where he gave an irrational rant for more than 10 minutes about naked shorting. (He implies in message board posts he used a digitally altered voice.) When he was done, Overstock CEO Patrick Byrne thanked him and said he didn't have a comment on what the guy said. "I don't have a dog in that fight," he said. "I don't pay it a whole lot of mind." Oh, yeah? Now hear this: This mystery investor formed a group against naked shorting and spearheaded a fund-raising campaign among NovaStar investors to fund two ads that ran in the Washington Post in recent days. Today the investor posted messages on Yahoo message boards saying that (surprise, surprise!) Byrne has been "a generous contributor to the ad and has pledged renewed support ... Maybe that will give some an idea of the size of the dogs in this fight." And to think Byrne said he had no dog in that fight. Wonder what else he isn't being quite up front about with his investors. Meanwhile, back to our mystery man: He says he keeps his identity secret for his personal safety. I bet. He was quoted on the Yahoo message boards last March saying that a $100 stock price for NovaStar "is not only achievable," but would be below its fair value based on a level of taxable earnings the company has yet to report. He went on to say $120 by the end of the first quarter "is not impossible or irrational ... and they would have to hit an iceburg (sp) or something" for that the company not to earn the taxable earnings to support it. Yet the stock is $35. (Did I hear somebody say, "Man the lifeboats?") The trouble with anonymous investors who hold themselves out on message boards as gurus is that they can quietly slip way into the crowd with no accountability -- leaving gullible investors holding an empty bag. There really ought to be a law. Speaking of naked shorting: A classic example of companies blaming "naked" shorts for their woes is Universal Express (USXP: news, chart, profile) , which bills itself as an integrated business-to-business services company centered on the private postal and international shipping industries. The company, which has a history not making money, even sued the SEC last year on damages from the "naked shorting" of its shares. A few weeks later the SEC retaliated, suing Universal Express on charges of dissemination of false information to the investing public." The suit is pending. At least check the stock of Universal Express's stock traded at about 10 cents.