What will happen to the last two amigos and all who follow them: "Online Trader Gets Humbled After Ignoring His Own Rule
By JOHN R. EMSHWILLER
Staff Reporter of THE WALL STREET JOURNAL
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.
|
