more bad news for bashers
It's only words: Internet chat can be serious business to corporations
Sunday, September 13, 1998
By Len Boselovic, Post-Gazette Staff Writer
Wanted: Raw investment advice for the masses. Willingness to speak your mind more important than spelling or grammar. Need not identify yourself or have impressive credentials. Ulterior motives not an obstacle.
Apply @ stock.message.boards, a national town meeting for investors held at the Internet's answer to the Wild, Wild West.
Related Article
Four most popular stock message boards
Founded to disseminate information to the common investor and fueled by an unprecedented bull market, stock message boards have morphed into a First Amendment free-for-all where insults, rumors and misinformation are traded as often as stocks. Unfettered by requirements to identify themselves, posters - people who "post" messages on the boards - leave it up to board readers to figure out whether they're looking at the gospel truth or being manipulated by someone playing 25-cent swings in a $1 stock.
Some posters have multiple personalities, holding a conversation with themselves by posting under a dozen or more aliases. Others are hired guns, paid by publicly traded companies to spread good news to investors. Posters can be small investors offering their two cents worth or disgruntled workers grinding axes at their former employer's expense.
"Probably about 5 to 10 percent of the people on there are knowledgeable. The others just want to be heard and seen," says Bill Talley, 64, a retired Honolulu detective who posts occasionally on Yahoo's Fore Systems board.
Talley says he'd never make an investment decision based on what he sees on message boards. But the amateur speculation, analysis and gossip can cause serious problems for a company's stock price or employee morale.
"You usually do not see sophisticated investors barking in the Internet," says Bill Thomas, a Buchanan Ingersoll lawyer who's counseled companies victimized by false information posted on message boards. It's an experience he calls "getting Yahooed," a reference to one of the biggest message board operators.
"It is a fact of life that companies are going to have to deal with," Thomas says.
Romper Room's Ground Rules
A message board, also known as a chat room, is a site on the Internet where people discuss similar interests by posting messages that can be read by everybody looking at the board. They can post messages of their own, either responding to the current topic or suggesting one of their own.
Some of the most popular stock boards are run by Yahoo!, Motley Fool, Silicon Investor and The Raging Bull, which set up boards based on investor interest (see accompanying box). Users access the boards by typing in a stock's ticker symbol. People must register with the operator and choose an alias before posting messages. "Lurkers," people who just want to read the boards, don't have to register.
How many messages are posted varies considerably, with some small, unprofitable companies attracting much more interest than big stocks. Take the case of Biocontrol Technology, a small Indiana, Pa., company that's lost $120 million in recent years. Even though its stock's trading for about 15 cents, there are more than 22,000 messages on Yahoo's Biocontrol board. That compares with more than 38,000 messages on Yahoo's Microsoft board and fewer than 300 posts at Yahoo's H.J. Heinz board.
"If there's a stock out there people want to talk about, we feel they have a right to talk about it," says Rusty Szurek, Raging Bull's vice president. "If investors use message boards correctly, they can be one of the most powerful mediums out there."
Szurek says 1,500 to 2,000 messages are posted daily on Raging Bull's 2,300 or so boards. Like most other board operators, Raging Bull doesn't screen or edit the messages, although it does lay down ground rules similar to those adopted by its competitors. Obscene, vulgar, defamatory or unlawful material is prohibited. Posters are limited to one alias so they cannot sway investor opinion by posting multiple messages bolstering their point of view.
However, operators rely on message writers to enforce the rules or bring problem posters to their attention. For operators to police the boards, "You would have to have a staff of hundreds of people," says Jill McKinney, Silicon Investor's Webmaster.
She says Silicon Investor's policy of charging posters - $100 annually or $200 lifetime - "keeps the quality of the site higher because it's more restricted." If board users bring obscene or other unlawful or offensive material to Silicon Investor's attention, the company investigates and can warn, suspend or terminate posters.
"We suspend and terminate people daily," says McKinney, who couldn't provide figures on how often board users are disciplined.
It's not often enough for companies who say they've been victimized on the boards.
"Clearly, these [board operators] are not in the business of governing what is said on those boards," says Thomas of Buchanan Ingersoll.
Who Are You?
One of the biggest complaints companies have about the boards is that most posters hide behind the shield of anonymity.
"What's to prevent people from saying anything they want or making up something?" asks Jim Leonard, spokesman for J&L Specialty Steel. "Any knowledgeable person should realize that these message boards are nothing more than a form of electronic graffiti."
Philip Services, a Hamilton, Ont., company plagued by accounting problems and losses from copper trading, has gone to court to find out who was making defamatory remarks about executives and female employees.
"This is not an issue of freedom of speech. This is an issue of what is clearly deemed to be unlawful behavior," says Philip spokeswoman Lynda Kuhn. "I don't think you can write off chat rooms as innocuous."
She says the company got Yahoo to remove offending messages from the board and has convinced judges to order Internet service providers - companies that provide posters access to the Internet - to identify the offending posters. Some individuals posted messages under a number of aliases, essentially carrying on a conversation with themselves, Kuhn says. One person used more than 20 names, she says.
Szurek says there have been few complaints about people using multiple aliases on Raging Bull. The board operator gives users an ignore option, which lets them screen out posters who are obscene, vulgar "or otherwise nontolerable," he says.
"We don't have many hypers - [people who tout stocks] - on our board because they know they can be ignored at the touch of a button," Szurek says.
No Comment
Most experts say companies should be aware of what's on the boards, but are better off not responding. If they do answer, they must follow the same rules for issuing a public statement: There can't be any material misstatements or omissions of fact.
"They have to be very careful that they don't trip over themselves by giving only half of the information. That is probably the biggest trap waiting out there for a company," says Thomas.
The Buchanan Ingersoll attorney says companies can tell operators that boards contain false information and that legal action is possible, but little usually comes of that. Says Silicon Investor's McKinney: "You'll get a lot of stuff on legal letterhead ... but it takes a lot to get a court order and it takes a lot more when [the company] is out of state."
Mellon spokesman Gregg Stein says the bank's policy of not commenting on message board rumors and speculation is just an extension of the bank's policy of not commenting on the same things when reporters ask about it. Mellon issued a policy in June prohibiting employees from posting messages on stock boards while they are at work.
Small companies can be hurt more by rumors than large companies with a big base of institutional investors, says Louis M. Thompson Jr., president of the National Investor Relations Institute, a professional group for shareholder relations managers. But no matter what the size of the company, it's probably safest not to respond to rumors, he says.
Investor Beware
If companies find message board information hard to manage, what about the investors the boards are supposed to serve? Not only must they judge a poster's motives, they have to decide if the poster is who he says he is and if he is in a position to know what he says he knows.
For example, what would you make of Bball_Superstar, who posted this message on Yahoo's Weirton Steel message board after one poster suggested the steelmaker had solid management:
"Take it from someone who knows,if (sic) this company could get the type of management that is required to run a successful buisness, (sic) then this steel mill would be making money hand over first," Bball_Superstar wrote.
Click on her profile and you'll discover this "someone who knows" is a single female whose interests include cheerleading and The Backstreet Boys, a music group popular with the prepubescent.
On Yahoo's Biocontrol board, a poster named Waldo Popper plays a game called Chat Room Poker. The object is to post false or misleading information about the company and see how many readers respond with messages of their own. Some players even provide links to other Internet sites where there's more allegedly valuable information about the company. Points are awarded based on how many users respond, the lengths of their response and whether they show up at the other Internet sites.
"Now you really know how wacked (sic) your valuation is when you compare it to my mindless drivel of made-up numbers and say [we] were close," Waldo Popper slammed someone in a message Tuesday.
Despite such charades, some message board users keep coming back for more.
"There is a lot of good stuff out there," says Nevin Cumpston, a 32-year-old Washington, Pa., steelworker who monitors boards for Allegheny Teledyne and other stainless steel producers "to keep up on what the people are saying and how they feel."
"There's no limit to the amount of knowledge you can get, but at the same time you have to be able to muddle your way through the cream to get to the milk," Cumpston says.
But when it comes to investing based on message board material, Cumpston is a lot more circumspect.
"I wouldn't personally vote my entire portfolio on the information," he says.
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