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Special Report: The stock, the Web, the CEO and his lawyers
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By Rosalba O'Brien and Matthew Scuffham
LONDON (Reuters) - As a CEO, David Bramhill could handle the online attacks on his looks and his character. "You get used to the personal stuff that goes up: 'Fat bastard,' etc.," says the burly one-time boxer...
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A screen shows the home page of the Advanced Financial Network (ADVFN) website November 18, 2010.
Credit: Reuters/Simon Newman
By Rosalba O'Brien and Matthew Scuffham
LONDON |
Mon Nov 22, 2010 7:51am EST
LONDON (Reuters) - As a CEO, David Bramhill could handle the online attacks on his looks and his character. "You get used to the personal stuff that goes up: 'Fat bastard,' etc.," says the burly one-time boxer and oil industry veteran. "I don't like it but I suppose being in the position I'm in, OK, they can take pot shots at me."
But when the messages on internet bulletin boards became a concerted campaign of criticism against his oil and gas exploration company, Bramhill snapped. "When it comes to dishonesty, and not running the company the way it should be run, and spreading untrue rumors -- this is where we've got major, major issues," a disillusioned Bramhill told Reuters in early September.
Bramhill's experience is part of a bigger story of insults and untruths involving a clutch of firms listed on AIM, London's junior stock market. According to the companies, they are victims of a kind of financial cyber-bullying in which discussions among investors on internet bulletin boards have turned abusive. Executives of the targeted companies, typically small and often in commodities, suspect an organized hand may be directing those behind the comments -- and then cashing in on the reaction.
The incidents expose a lack of effective regulation of investment chat boards as well as the huge impact anonymous posters can have on smaller companies and people's lives. Soon after Bramhill spoke to Reuters, the 59-year old, who also received physical threats from people posting on investment message boards, announced his retirement.
The company he led, Nighthawk Energy, invested $30 million in its U.S.-based projects over the last financial year and was earlier this month rated a 'buy' by Goldman Sachs. Frustrated with a lack of action by Britain's market regulator, which says such cases are difficult to police and a low priority, Nighthawk, fellow AIM-listed oil explorer Nostra Terra and several other small companies have considered legal action against message board-posters, who typically use multiple aliases to disguise their identity. In rulings that have emboldened the companies, Britain's High Court granted orders to both Nighthawk and Nostra Terra this year giving them the right to order message boards to disclose the identities of those behind the disparaging remarks.
The issue is not unique to Britain. Companies in the United States have also complained about message board users, though there the right to free speech provides significant protection for posters. Not so in Canada, where last March small cap resources firm Farallon Mining Ltd won damages of $425,000 against a user of online site Stockhouse. It was the biggest defamation payout ever awarded against a single person in Canada.
"The bulletin board becomes the tail wagging the bloody company," Bramhill says. "There was one particular theme of dishonesty in the company, of projects not being correct. We're aware of all this stuff. It's all a load of baloney and you try not to look at it but people send you it and ask, 'What are you going to do about it?'"
Another executive told Reuters that his company has found one individual posting defamatory comments using 22 different aliases. "We believe there is a network behind it that's trading and manipulating and they're using him as the front," says the executive, who spoke on condition of anonymity because the company is pursuing the investigation. "We want to get the bigger fish - otherwise we would have taken him down already."
LATE-NIGHT LIBEL
Investor message boards appeared in the very early days of the web and boomed among private investors working as "day traders" during the dot-com bubble of the late 1990s. The boards Nighthawk and Nostra Terra have focused on in their legal challenges are ADVFN, or Advanced Financial Network, and iii, or Interactive Investor. ADVFN is Europe's biggest financial markets website with two million registered users and as many as 12,000 posts a day. iii claims 1.6 million users, and clocked up around 180,000 posts from over 9,000 contributors over the last month.
Neither board requires participants to reveal their real identity as they post, and it's not difficult for a single user to create multiple aliases. ADVFN users can opt for what the site calls the "more refined environment" of premium boards at a cost of 5 pounds ($7.97) per month, or enter the fray of the much more popular free boards, which require a simple registration. Posts on message boards vary from the short and bitter ("I'm out", to flag a stock sale) to mini-essays dissecting the minutiae of company statements. As with most internet forums, the grammar is dubious, insults are bandied freely and the messages are loaded with abbreviations and euphemisms that can be indecipherable to outsiders.
Because of their potential volatility, small companies in risky industries like oil exploration are a favorite topic. On the iii forum in October, for instance, Falklands oil explorer Desire Petroleum was one of the most talked about stocks. One evening posters speculated on the company's drilling campaign, on which it was about due to report, through the night. "There were very strong bad vibes yesterday and I sold my last remaining DES," said 'Pro_S2009' at 4 in the morning. His or her inclination proved far sighted. At 7 am Desire announced that a well was a 'duster' -- had no oil -- kicking off hundreds of accusatory messages, conspiracy theories and recommendations. "Stick your buy orders in very low," said one. "The city insiders know the deal," said another. Many were unpublishable.
The big audiences the sites attract have delivered good returns for a few. Cambridge graduate Tomas Carruthers founded iii in 1995 and floated it in 2000, when, like many internet stocks, its market value rocketed even though it made a loss. Sold to an Australian company for around 50 million pounds in 2001, it was eventually bought back by Carruthers and partners in 2004. ADVFN, which itself is listed on AIM, last year made a small profit on revenues of 8 million pounds. The company is founded and run by internet entrepreneur Clem Chambers, a self-styled market commentator and author of financial thrillers such as "The Twain Maxim", a story of a shady mining promoter and a broker missing in the Congolese jungle, and financial investment articles and books such as the upcoming "101 ways to pick stock market winners with ADVFN".
ADVFN declined to be interviewed for this article and did not answer questions sent in an email. A spokeswoman said: "Our bulletin boards are not part of our strategic outreach at the moment, as such we don't have any material on these topics."
At iii, Chief Technology Officer Tim Huckle said: "We operate and encourage a 'neighborhood watch' process on the boards, where the site users themselves police postings by highlighting those that are offensive or questionable." Since August 2010, Huckle said, iii has required new users to ring a contact center that takes "the necessary steps to identify the user as far as possible".
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