Thanks for bringing this to light. You are always on top of everything.

Best,
Patrick

I guess my biggest problem comes with a distinction in the type of content being produced. Everyone knows that you can read online message boards for individual stocks and get all sorts of stock advice — long, short and everything in between. But when a SeekingAlpha article appears under the headline section of Yahoo and is mixed in with content from the WSJ, NYTimes, and other media outlets, it appears to be more credible than a message board post, especially when someone notes that they’re a fund manager. In this particular case, I seriously doubt the guy was a hedge fund manager, but Seeking Alpha allowed him to identify himself that way without doing their homework to make sure he was who he said he was. Remember: on the internet, even my dog can be a hedge fund manager!

As for who was behind the post, there’s been a few theories in addition to underwater executives. One I read over the weekend suggested it was folks from either the Motley Fool or Street.com — two competitors in terms of financial content — who were seeking to make SA look bad.

As to SA’s Quality Control, which my friend David Phillips brings up, SA Founder David Jackson says they have 1,300 contributors. There is simply no way to manage that number of contributors without an extensive (and expensive) staff whose job it is to vet pieces before they are posted. Just something to keep in mind the next time you read something on SA. My own experience with SA was that the editing was limited to changing my headline for SEO-purposes to maximize Google ad revenue as opposed to editorial purposes.

Folks from the SEC (and the DOJ) read this site regularly, judging by my logs, so let’s hope they can get to the bottom of this.

First, I agree with the comments made by Davis. Although I do not question the integrity of the folks working over at SA, the plethora of “fluff” content being published over at their shop these days hurts the SA Brand. David Jackson faces a difficult issue–how to grow SA traffic. This road taken–the more content published, the more traffic stopping by his site. Sadly, as pointed out by your readers, too few editors trying to follow too many postings. Albeit I left SA on good terms, Davis is correct in pointing out that reputation is everything. I did not want my 10Q Detective brand associated with a site known for neophyte ‘would-be’ analysts. [that said, many an irrate bull has called me a hack when they disagreed w. my posited opinions!]

Second, the entire SA fiasco reminds me of the stunt 15-year old high-schooler Jonathan Lebed pulled back in 2000, spamming Yahoo! Inc’s message boards with hundreds of ‘pumped-up’ stories, heralding certain penny stocks as buys–as he was selling into the volume expansion & stock price jumps.

In the end, however, is SA any different from buying a stock based on a brokerage-pumped buy recommendation?

As you succinctly said: “buyer beware!”

My Best,
David J Phillips, editor
10Q Detective

The first thing I did was to try and see what type of damage this person’s post did to the company’s stock price, and it appears, at least to me, it did little damage. Over the past 5 trading sessions, the stock has traded between $2.87 and $3.13, with $3.13 coming on Monday 06.24.08.

The next thing I did was take a look at the company’s resistance and support numbers. Based on current levels of $2.87, the stock has first resistance at $3.27, a 14% increase from current levels, $3.47, a 21% increase from current levels, and support at $1.82, a 37% decline from current levels. Looking at these numbers tells me if the mystery person’s intent was to make money shorting the stock, he left one helluva lot of money on the table.

Lastly I looked at the company’s financials from their last SEC 10-K filing of December 2007. I have to ask. How could a company with financials as poor as this company’s, ever manage to end up with 56.7 million shares of stock outstanding? No offense, and I realize we all start somewhere, but I have a real hard time believing that anyone would intentionally buy shares of stock in this company.

Based on my back of the napkin math, the company has Net Operating Profit After Taxes of (251.4%)! In addition, Shareholder Equity is $0.58, the same as Tangible Book Value, and the company had a Return on Invested Capital of (107%). Lastly, the company has an Enterprise Value of $2.64, an Equity Value of $3.10, and a PE of (6.2).

So what does all of this mean? To be honest I have no idea. But it makes me wonder if the company is going to remain a going concern, which further makes me wonder if perhaps an insider attempted to short the stock because they knew the stock options they held were soon going to be worthless. I’m not saying that’s what has happened, I’m just saying were I the SEC, I would certainly be looking in that direction.

Wax

While I do agree with you that the internet is transforming media and raising some interesting issues, I also feel that reputation is going to become even more important not less. Ten years ago, I used to read newspapers, but couldn’t tell you who the writer was. Now with RSS, I pay attention to individual writers, but couldn’t tell you which publication(s) they work with. I think Michelle’s site is a great example. Because she has such a strong track record of uncovering scuzbuckets and (attempted) buried information, I know that when she publishes something that I don’t have to fact check her because she has always stuck to the facts in her articles. When it comes to a random blogger or message board commenter, I always try and verify what’s being posted before blogging about it or telling people. All of this caos may end up distracting the mainstream media, but it also enhances the value of the great journalists.

I think what this whole incident is indicative of something much broader that few people understand … in the next few decades we will likely see the breakdown of copyright law, defamation law, and a further decline of main stream media. People will learn that all that reputation means little and it will become easier to check facts (for example, it took me 40 seconds to check MVIS’s balance sheet and cash flow). I could go on an on about how the paid media messes up their facts all the time (and I know y’all would probably agree) … for example, has 60 Minutes issued a retraction of their Biovail story yet?

The fact that those who left comments on the blog post quickly pointed out the article’s flaws and the fact that the article got pulled shows that the system works. Those who were dumb enough to sell the stock because of a random internet article shouldn’t have owned the stock in the first place, because they obviously did not due diligence.