Thread,
While we discuss issues of transparency and forthrightness related to Asia Tiger economies this from WSJ should help us regain our perspective a bit:
Reprinted from WSJ for personal use only:
Stock Genie's Presence Grows, But Site Isn't All It Appears
By JASON ANDERS
THE WALL STREET JOURNAL INTERACTIVE EDITION
Even on the Web, where free investment advice abounds, Stock Genie
seems to offer a lot.
Its blue genie mascot -- already ubiquitous
from the site's aggressive on-line advertising
campaign -- offers an e-mail newsletter,
links to stock quotes and, most prominently,
its "stock pick of the month" (recently renamed "stock profile of the
month"). The picks are described as the product of "hours of work and
research" by analysts, which could double or triple in value in six month to
a year.
But there's another criterion for becoming a profile of the month -- one
that isn't readily apparent: The site (www.stockgenie.com) is paid by
companies to promote their stocks.
Some of the
companies featured are
small and unseasoned,
with shares that trade
only in the loosely
regulated
over-the-counter
market. But more well-
known companies also
have been featured.
They include Oxford
Health Plans, the
troubled
health-maintenance
organization, which
appeared on Stock
Genie in December, two months after its stock price was halved as details
emerged about its massive losses.
A spokeswoman for Oxford said Monday that the company didn't make
any payments to the Stock Genie site. "Oxford has no knowledge of this
company, and has never dealt with them in any way," says Madeline
Hardart, a spokeswoman for Oxford, which is based in Norwalk, Conn.
"I have no idea how we appeared on that site," she says.
But information buried deep on the Web site discloses that each of the two
most recent companies profiled paid $50,000. In at least one case, a
Stock Genie affiliate was allowed to buy stock-purchase warrants in a
profiled company. And Stock Genie says its "editor," who isn't named on
the site, and the editor's family may acquire stock in a company before it is
profiled on the site.
The Web site discloses these payments in
disclaimers, as required by the U.S.
Securities and Exchange Commission.
But the information isn't easy to find: The
payment made by April's featured
company, for example, is spelled out
deep in a more than 500-word
disclaimer.
Moreover, disclaimers are only available for Stock Genie's two most
recent profiles. Five other companies are listed as previous profiles, but it's
now unclear how Stock Genie was compensated.
The Stock Genie site, and others like it, illustrate the dangers investors
face in using the Internet as a means of gathering investment tips. These
sites also point up the difficulties that securities regulators have in policing
the Internet. Even with the Stock Genie's disclaimers, investors, especially
those new to the Internet, still must look carefully to find the terms of the
site's compensation packages.
The SEC declined to comment specifically on
Stock Genie. A representative for Stock
Genie couldn't be reached despite repeated
attempts.
The profile of the month is the centerpiece of the Stock Genie site, touted
in a scrolling message at the top of its home page and in electronic mail
alerts sent regularly to readers. Last month, the site began referring to its
featured stocks as "profiles" rather than "picks," but still describes them as
being those it believes could increase sharply in value. A table on the Web
site lists the performance of featured stocks, showing the gains they posted
after being featured.
Stock Genie's on-line advertisements -- often colorful banners with an
image of its genie mascot, sometimes inviting investors to "see into the
future" -- have appeared on a number of high-profile Web sites, including
Silicon Investor, an on-line investing forum (www.techstocks.com), and
The Wall Street Journal Interactive Edition.
Want to receive an e-mail alert when Heard on the Net columns are published?
See details on how to subscribe.
Dozens of sites promoting stocks have exploded onto the Web in the past
two years. They cost very little to set up, often are highly profitable, and,
says the SEC, often do a good job of deceiving investors into believing
they are getting legitimate investment advice from a reputable source. "Too
many times this is the classic 'pump and dump,' " says John Stark, special
counsel to the SEC for Internet projects. "You pay these people to hype
your stock, and it's not clear that they're being paid to do so."
Finding out who is behind the curtain at Stock Genie isn't easy. Several
e-mail messages sent to the only address given on the Web site weren't
returned. The company's Internet domain name is registered to Sutton
Capital Group in Port Washington, N.Y, but directory assistance there has
no listing for such a company. The only phone number given in the domain
registration is listed as a fax number, but it appears to be a pager. The
address given is a post office box.
Stock Genie's advertisements were designed by a New York advertising
agency called Adshop. Rob Torre, one of Adshop's founders, says he
can't disclose the names of the people who run Stock Genie, and says
Adshop only handles design and marketing for the site, not content.
Stock Genie's current "profile of the month" is Voxcom Holdings Inc., a
Dallas company that operates, among other things, seminars for
entrepreneurs and a business that prints novelty trading cards.
Voxcom's stock is traded on the OTC Bulletin Board, a quotation service
run by the National Association of Securities Dealers. Stocks traded there
aren't subject to the same regulations as are shares traded on the Nasdaq
Stock Market, for instance, or the major U.S. exchanges.
See the full text of the disclaimer that discloses compensation paid to Stock Genie
by Voxcom.
According to a disclaimer on the Stock Genie site, and attached to an
e-mail alert that was sent to readers when the Voxcom pick was made,
Stock Genie received $50,000 from Voxcom, and 10,000 shares of the
company's stock -- worth $47,500 based on Friday's closing price. The
disclaimer says Stock Genie can also receive additional stock, up to a
maximum of 90,000 shares, "subject to certain conditions." The conditions
aren't disclosed.
The disclaimer also says that an affiliate of Stock Genie, in a private
transaction, purchased 220,552 warrants for $110,276 exercisable into
stock of the company at $4 a share.
Don McLellan, president of Voxcom, says he insisted that Stock Genie
make it clear to potential investors that the Web site was being paid to
promote his company. He says Stock Genie was just as adamant about
the disclosure as he was. He declines to identify anyone who works for
Stock Genie.
ProNetLink, an import-export Web company featured as Stock Genie's
"pick of the month" for March, paid $50,000 to Stock Genie. Glenn
Zagoren, who handles marketing for ProNetLink, says the fee was well
worth the exposure that it gave the upstart company. (ProNetLink also
was the subject of a recent Heard on the Net column.)
Mr. Zagoren says he was shocked when Stock Genie sent out bulk e-mail
to its users that included a release from a brokerage firm critical of
ProNetLink. "That wasn't what we retained them for," Mr. Zagoren says.
"We were very upset about that." When he complained, he says, his Stock
Genie contact said the mailing was an accident, sent out because Stock
Genie mistakenly thought the release had come from ProNetLink itself.
Stock Genie later sent out another mailing, telling recipients that it was
committed to passing along both good and bad news -- and included three
positive news releases about the company.
See a warning about on-line investing on the SEC Web site.
Mr. Zagoren says users understand that Stock Genie is being paid by the
companies it promotes. "I think people recognize it for what it is: an
advertisement," he says.
But regulators say many investors still don't fully understand the risks
associated with gleaning investment information from the Net. "When we
started investigating [Internet investment sites] a couple years ago, no one
was disclosing the payments they received," the SEC's Mr. Stark says. "I
still don't think disclosure is complete and adequate. People design a slick
Web site and make themselves look like a Fortune 500 company. You
think you're getting legitimate investment advice."
|
