Newspaper article THE JOURNAL RECORD

Stemming the Tide of Touts on Those Stock Message Boards

Newspaper article THE JOURNAL RECORD

Stemming the Tide of Touts on Those Stock Message Boards

Article excerpt

With no sales to speak of, a long string of losses and a tiny market capitalization of $70.3 million, Imaginon is not the type of company many investors think twice about.

On the Internet, however, Imaginon is something of a celebrity. Every day, hundreds of people burn up the sites known as stock message boards, pondering the fate of the company, a software developer in San Carlos, Calif., that recently released its first products, including a Java-based Web browser.

In December and January, Imaginon postings on the Yahoo Finance board went from a few dozen a week to a few dozen a day to a few dozen an hour, with daily trading volume climbing from near zero to its current average of 1.84 million shares. As stock message boards grow in popularity -- well over 30,000 messages are posted on the four largest boards on a typical day -- pressure is mounting on several fronts to rid the boards of people who use them to illegally tout stocks and spread false information. The Securities and Exchange Commission has defined such touting as lying about companies, lying about one's independence from a company or failing to adequately disclose the nature, source and amount of compensation one receives from a company. As talk about Imaginon grew on the message boards, fueled by a reverse acquisition the company completed on Jan. 20, its stock price shot up, from 41 cents a share in October to a high of $15.25 in intraday trading on Jan. 26; the stock closed at $5.75 on Friday. "It's kind of like the Jerry Springer show -- it's gotten out of hand," said David M. Schwartz, chief executive of Imaginon, who attributes the volatility to the message-board chatter. From time to time, Schwartz posts his own messages on Yahoo's board. Using the name IMON--2nd and identifying himself as the chief executive, he says he tries to dispel the many rumors about the company. At the end of January, only days after Schwartz had dismissed a rumor that the company had inked a deal with America Online, someone using the name G--Gekko--1999 logged on, inquiring whether anyone had heard that Barron's, the financial weekly, was predicting that the stock would hit $225 a share. …

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