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Technology Stocks : C-Cube -- Ignore unavailable to you. Want to Upgrade?

To: Stoctrash who wrote (25016)	11/10/1997 12:00:00 PM
From: DiViT	Respond to of 50808

Herbie:... BUSINESS INSIDER Is the 'Safe Harbor' Provision Too Much of a Safe Haven? / Also, Vivus' quiet FDA filing, and will Sun get a new rebel? Herb Greenberg ÿ 11/07/97 The San Francisco Chronicle FINAL Page B1 (Copyright 1997) ÿ Two years ago Congress created legislation that creates a "safe harbor" against federal class-action lawsuits by companies that make forecasts about their future. Short-sellers, however, are grumbling that companies are hiding behind the law to make outright lies in an effort to keep their stocks elevated. Indeed, today, most quarterly and annual reports filed with the Securities and Exchange Commission -- even press releases -- include wording to the effect that it "contains forward looking statements, which are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements." Companies routinely read those statements on conference calls with analysts, and even refer to them in oral presentations. The result: "It encourages people who previously may not have lied or stretched the truth to do so," says short-seller Marc Cohodes of Rocker Partners, who is no stranger to this column. "Now it's easier to let go and speculate because you can hide behind the safe harbor legislation." If a company then stumbles and a lawsuit is filed, say the safe-harbor critics, executives can simply say they didn't know that there was a problem. Yet you can only wonder, as I do, why the short-sellers know there are problems long before the companies. Boston Chicken, Oxford Health and Informix -- three big recent stock disasters -- had been under scrutiny by shorts and analysts who had suspected problems. Would Galoob Toys have touted in its second-quarter earnings release that it expected "broad-based sales growth" in the second half of this year if there had been no safe harbor? Would C - Cube Microsystems have blamed the short-sellers for spreading rumors about its company if there had been no safe harbor? Both companies have since stumbled. Stanford Law School professor Joe Grundfest isn't sure safe harbor would have made a difference in what the two executives said. He says that people were making those kinds of comments before the safe harbor legislation was enacted. And Silicon Valley attorney Larry Sonsini, who helped draft the legislation, points out that the legislation didn't prevent lawsuits from being filed in state courts. And he says there hasn't been any drop in the number of suits filed. He adds that the law doesn't prevent the SEC from taking action, even if a company is merely being reckless with its disclosures. Meanwhile, short-sellers gripe that they're routinely barred from analyst conference calls and other meetings because management doesn't want to be in a position to publicly deny something that may actually occur. "Many managements are saying they're comfortable with the street's projections, and they know better," says short-seller Jim Chanos of Kynikos Associates in New York. So, why do they do it? Chanos and others believe the positive comments help many companies keep their stocks high so executives can exercise options or simply sell their stock outright. As a result, he suspects that come the next bear market, the safe harbor could be no more. "It will be much more onerous when people lose money," he says. So far, with the exception of a few isolated examples, that hasn't been the case. SHORT POSITIONS -- From the FYI file: Menlo Park-based Vivus recently (and very quietly) filed a report with the FDA, disclosing that a 79-year old patient suffered a heart attack and died while using its drug to treat impotence. It's believed to be the first death report ever filed by Vivus, whose stock ranks among the Bay Area's most volatile. Chief Financial Officer Dave Yntema initially declined comment on the basis that he doesn't believe I've treated Vivus fairly. He then said the patient in question is just one of a half a million who have used Vivus' impotence treatment over the past four years. He says the patient had suffered a stroke a month before dying, but hadn't told his doctor (presumably, his urologist). Vivus' stock, meanwhile, has lost 43 percent of its value in the past few weeks, closing yesterday at $23.13. The biggest seller is believed to be Vinik Asset management (of Fidelity's Jeffrey Vinik fame), which recently filed that it sliced its stake in the company to 4.8 percent from 7.2 percent. Some investors are concerned that a new anti-impotence pill from Pfizer could steal market share from Vivus, whose product must be injected through a tiny catheter directly into the penis. -- G-g-g-g-gossip (pure and unadulterated): Sun Microsystems' CEO Scott McNealy's wife is expecting the couple's second child. The first child's name is Maverick. Chatter is that the second will be called Rebel. (Or would that be Rebyl?) Nothing would surprise McNealy watchers. Sun officials didn't return my calls.