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. Last Updated: 07/27/2016

Online Column Gets Stocks to Skyrocket




WASHINGTON -- Even by the sky's-the-limit standards of the Internet age, the financial takeoff of a little-known, Cayman Islands-based company called Xcelera.com was nothing short of remarkable.


From Sept. 29, 1999, through March 22, 2000, the stock soared in value by more than 3,000 percent, and a single online stock columnist provided part of the rocket fuel. On Sept. 29 last year Xcelera was favorably mentioned in a column by Jon Markman, managing editor of Microsoft Network's popular MoneyCentral site.


The stock's surge was good news for Markman as well. At the bottom of his Jan. 5, 2000 column, which he used to tout the stock for a third time, Markman disclosed that he owned shares in Xcelera.com Inc. By late March he had turned a $335 investment into $4,120 in just three months, at least on paper. But the value of his investment plummeted as Xcelera stock dropped by 70 percent in recent weeks.


Markman fared better with Superconductor Technologies Inc., another stock he trumpeted on the web site. In one month the value of his holdings skyrocketed to $13,293 from about $1,200, and while the stock also has fallen sharply, his shares still are worth about twice what he paid for them.


The Internet has not only allowed millions of people easy access to stock trading, it has become the medium through which countless individual traders find and share information - through chat rooms, bulletin-board postings and online news services such as Markman's - in a constant search for a leg up on their investments. The explosion of fast-moving information about stocks on the Internet has contributed to wild swings in the markets, especially the Nasdaq Stock Market, in recent months.


But individual investors aren't always aware of the potential conflicts among those who dole out advice.


Markman says he followed the MoneyCentral rule that journalists are allowed to write about companies in which they own stock, as long as they don't trade in firms that they know will be the subject of an upcoming story and wait two business days after publication of their stories to resume trading.


"I can see that there would be an appearance problem," Markman said. "But the emotional value of owning stocks informs our view and helps us be better writers about the market."


MoneyCentral is the Internet's most popular financial site, with 4.3 million visitors in March.


The episode underscores the power and the pitfalls of online journalism.


"It is totally and completely indefensible for any journalist to trade stocks in companies he writes about," said Christopher Byron, a financial columnist for the New York Observer and MSNBC.com who was the first to mention Markman's role.


Chris Ullman, a spokesman for the Securities and Exchange Commission, said the agency is devoting more resources to stock fraud on the Web. But he said it isn't illegal for someone to publicly promote a stock he owns, even with the express purpose of boosting its price, as long as he says nothing untruthful about the stock.


In his Sept. 29, 1999 column, Markman called Xcelera "a high-risk long shot" but a "stock to watch." He said Xcelera might be included on his list of stocks that could rise 10,000 percent over the next 10 years.


That day 1,238,400 shares of Xcelera were traded, compared with 124,800 the day before. On Sept. 29 and Sept. 30, the price of Xcelera stock jumped by 50 percent, to a split-adjusted $3.43 3/4 a share.


On Jan. 5, Markman noted Xcelera had surged 550 percent since he first wrote about it in September, attributing the rise in part to an investment and endorsement by Hewlett-Packard Co.


"With a market cap of $1.7 billion, I think this one has a clear shot at $25 billion in market value, and potentially a lot more," he wrote.


That was the column in which Markman disclosed he owned Xcelera - along with stock in Sun Microsystems Inc., America Online Inc., Yahoo Inc., Cisco Systems Inc., Nokia Corp., Oracle Corp., Qualcomm Inc. and Microsoft, all of which were mentioned in the column or on Markman's hot-stocks list.