As reported Tuesday in

The Street

,

Macromedia

(MACR:Nasdaq) shareholders sold almost 250,000 shares of the company's stock during the past six months as sales, earnings and business prospects worsened. But those corporate insider sales mark only one aspect of a strange eight months for the maker of Web software tools company.

Since early June, Macromedia's stock price has skidded 78%. The price drops have come in heart-stopping moments, rather than over long periods of time. And the proximity of high-volume, steep drops prior to releases of bad news have irked some investors and raised questions about the company's responsibility to keep shareholders informed of important corporate developments.

In addition, the company's top executive went out of his way to defend Macromedia in on-line discussions in late November. His posting, a response to postings from some of the individual shareholders who have passionately--and painfully--followed Macromedia stock in the past several years, came right in the midst of the company's recently announced terrible fiscal third quarter.

Macromedia says it has dutifully kept investors informed of corporate developments during the past year. (Various rules of the Nasdaq Stock Market and the Securities and Exchange Commission require companies to provide timely, public disclosure of material corporate news and events and to address important misperceptions concerning stock price and corporate performance.) But a close study of the last eight months of trading raises some questions.

Last year on June 5, Macromedia stock closed at 45 1/8, close to the top end of its range. But during the ensuing days, the company's stock plunged on heavy volume with no explanations. The precipitous drop prompted the

Dow Jones News Service

and the

Reuters News Service

to query the company about any developments.

Dow Jones

reported no returned calls, and

Reuters

reported that the company said it had no significant corporate developments that would explain the stock-price movement.

By June 13, Macromedia had fallen 34% to 29 3/4 from June 5. Volume surged above 8 million shares on June 13 and on-line chat-boards went into overdrive, with investors wondering if some bad news had seeped into the market. Despite the steep decline,

Alex. Brown

(not involved in underwriting the company's IPO) upped its investment rating to strong buy.

As analysts and investors bickered about what was happening, the company remained mute. Not until late on July 8 did Macromedia let investors know of problems: Sales were flat and the profit outlook was not up to expectations. Talk of shutting the barn door after the cows had become well-grilled steaks--Macromedia shares had skidded to 19 1/4, a breath-taking drop of 57% in one month before the company had decided to make any announcement. After the statement, shares dropped to 15 3/8.

Still, Macromedia's earnings warning contained nuggets of optimism. The company, plagued by the weak sales of Apple Macintosh computers, a key platform for Macromedia software, said it was "encouraged" by sales among Windows-based platforms.

After that July announcement, Macromedia shares edged higher. By late December, they were back up to 20 3/4. But then something strange happened again. As the New Year opened, volume in Macromedia intensified. After averaging fewer than a million shares a day in December, Macromedia traded 1.7 million shares on January 2, 1.8 million shares on January 3, 3.3 million shares on January 6, 1.9 million shares on January 7 and 2.7 million shares on January 8.

During those heavily traded sessions, the company's price dropped 25%, sliding from 18 to 13 1/2. At the time, the

Dow Jones Industrial Average

was setting record highs, and the

Russell 2000

index of small cap stocks was rising steadily.

With volume high and the stock skidding, what did the company say? Nada. It was an eerie re-run of the June skid ahead of bad news. The bad news this time came on January 9 when the company reported a shocking fiscal third-quarter loss. The stock subsequently dropped to 9 5/16 and now trades at about 10.

Kimberly Leo of Macromedia investor relations says the earnings announcement was tentatively scheduled for January 21, and the company accelerated its release in order to fully disclose the troublesome quarter. Moreover, Leo says the company feels it has acted responsibly in disclosing relevant corporate information to the broader investing public. She says she received many angry phone calls from investors after the earnings announcement.

And in fact, the company wasn't completely silent during the quarter. In the midst of what would prove to be a disastrous quarter, Macromedia Chairman Bud Colligan posted a message on-line in late November.

Shortly after midnight on the West Coast on November 20, Colligan entered a heated posting fray involving his company on

Silicon Investors

(www.techstocks.com). In a lengthy post (#622) he disputed negative comments about the company. He insisted that the company had maintained its responsibility to keep investors informed of corporate developments and he highlighted Macromedia's past accomplishments.

"We have over 1,000,000 satisfied customers and the broadest cross-platform product line of digital media tools in the industry. Our products have won over 100 industry awards and our customer support and web site are among the best in the industry....we have always conducted our business with the highest integrity."

He also defended his own sale of Macromedia stock, saying he sold stock on a regular basis to avoid appearance of impropriety, and that most of his net worth was tied up in the company. Colligan's comments, while not overly exuberant and acknowledging disappointments, reflected a certain calmness about Macromedia's future. Moreover, he pointed out that investors holding Macromedia stock in late November would have tripled their money since the IPO, "despite the recent drop in stock price."

"We are all disappointed with the stock performance in the last year," he wrote. "And we are working on bringing out world class products that will provide the growth for the future."

Since those comments, the 300% gain from the Dec. 1993 IPO that Colligan mentioned has declined to a 58% gain.

Leo confirms that Colligan made the posting to

Silicon Investors

, and says the posting was appropriate and not in any way misleading. She adds that it has no policy concerning executives making posts on Internet boards.

The SEC has intensified its oversight of Internet postings and on-line chatter, but so far it has brought only one case. Its main message has been that buyers should beware and do their own due diligence and research related to company information gleaned from the Internet.

The SEC declined to say if it was scrutinizing activity at Macromedia. But two people familiar with SEC oversight practices say Macromedia's actions and its stock movement create the kind of situation that attracts agency attention.

The posting of an angry internal email by Wired Chief Executive Officer Louis Rossetto to an on-line service contributed to the derailment of Wired Ventures IPO last November. In that instance, the CEO did not post the message, though the content of the email raised legal questions about discussions of a company's prospects ahead of an IPO.

By Dave Kansas

dkansas@thestreet.com