Concern Grows over Influence of Internet Bulletin Boards on Stock Market Dealings ; NEWS ANALYSIS On-Line Gossip Can Be Useful, but the Tips Gleaned Can Also Be of Dubious Quality, or Even Malicious Falsehoods
Cope, Nigel, The Independent (London, England)
IT WASN'T long ago that if you were a private investor and fancied a gossip about your favourite share, the only avenues available to you might be a chat in your investment club or a discreet word in a City pub.
Now there is a Nineties version of the coffee houses that proved to be the genesis of the London stock exchange in the 17th century.
They are called bulletin boards and these on-line investment discussion groups have both the industry regulators and publicly quoted companies worried.
The regulators are concerned that this new wave of Internet- inspired private investors, who have rushed headlong into share- dealing, are being unduly influenced by the often unreliable information posted on these sites.
They say that the information is at best of dubious quality and at worst provided by people who are only interested in ramping shares they have already bought.
Publicly quoted companies are worried because these on-line chatrooms have opened up a hornets nest of gossip, deliberate dis- information and mischief-making over which they have precious little control.
Traditional press offices, long used to dealing only with more traditional media outlets, find themselves embroiled in a world that they barely understand but which can cause huge gyrations in the share price of the companies that they represent.
The only people who do not appear to be worried by it all are the users, who suddenly find themselves able to swap news and views about investment tips in a way that was previously impossible. They can say what they like, when they like and there is precious little that the regulators can do to stop them.
"It's like the Wild West," says one stockbroker. "People say all kinds of things and it is very difficult to distinguish between the quality tips and the rubbish."
There are a host of bulletin boards, with the best known including the Motley Fool site, E*Trade and Hemmington Scott. Most of them supply regular investment news but also offer links to bulletin boards where members can e-mail in their comments.
Some of it can be extremely accurate. Take this from the Motley Fool bulletin board on 24 November: It reads:
"Guess what I heard today?
t Stock: United Biscuits
t Info: Takeover by rival
t Stage of deal: Last few days of due diligence, ie a matter of weeks
t Buyer: This is a surprise ... Danone."
The share price then was around 220p. This week Danone duly emerged as a member of a consortium that is embroiled in a bid battle for United Biscuits that has pushed the shares to 260p. Other so-called "hits" have included tips on bulletin boards that Benckiser, the Dutch household products group was set to bid for Reckitt & Colman, which also proved correct.
Fans of bulletin boards say that they are a great way for smaller investors to steal a march on the institutional investors who have treated this new area with considerable disdain. …