A footnoted soapbox…

June 27, 2008

We interrupt our regular trawl through the filings to talk about something that’s been on my mind all week: what happens when someone uses a popular Internet site to bash a company and basically games the market. I’ve been interested in this ever since I first wrote about online message boards for the NY Times back in 1999 and 9 years later, the boards are still rife with trash-talking.

But what happened this week with Microvision (MVIS) and the popular stock market aggregator Seeking Alpha is totally different. As Barron’s Eric Savitz reported on Monday, Microvision’s stock fell nearly 20% after this very negative article was posted on Seeking Alpha by someone named Liam Mulcahy who claimed to work for a hedge fund that was shorting the stock. The article (but not the headline) was removed from the site on Tuesday after a Microvision spokesman contacted the site. This Seattle PI story has more details.

Now I have no opinion on Microvision. I haven’t looked at their filings and I neither own (nor short) their shares. But as someone who writes about publicly traded companies based on the facts that are in the filings, it’s deeply disturbing that virtually anyone — or perhaps the word is no one since it’s not clear that Mulcahy actually exists — can go on to a major site like Seeking Alpha and post whatever they want about a publicly traded company with little or no consequence and make money in the process.

Granted, people who make their investment decisions based on some commentary that they read on the Internet probably get what they deserve. And given Microvision’s size, it’s a much easier target than, say, a company like Motorola (MOT). And to be fair, Mulcahy clearly stated that he was shorting the stock. I should also note that I’ve had my own issues with Seeking Alpha and left them over a year ago for a variety of reasons.

Still, for all of us who write about publicly traded companies online — and there’s a lot more now compared to when I started nearly 5 years ago — this will hopefully serve as a wake-up call. Let’s hope that the SEC is also paying attention to the Microvision/SeekingAlpha mess. While the Internet gives people access to information that was never readily available before, it also makes it a lot easier for someone with questionable goals to game the system. In the meantime, caveat emptor!

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