How V-One May Have Stretched the Truth in Its Stock-Lifting Press Release

Also, Boston Chicken featherbrains and other investors keep searching for value from bankrupt firms.
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A single press release on Tuesday was all it took for

V-One's

(VONE) - Get Report

stock to lift 279% in a single day. While it gave up part of that gain Wednesday, investors continue to believe it has something really hot with a new virtual private networking (VPN) software that V-One touts is "the first ... to ship with both client and server support" for the Linux operating system.

Just one problem -- one that afflicts all too many public companies under pressure to please Wall Street: V-One's press release went a little overboard with the hype. Specifically, V-One

wasn't

the first company to ship a VPN software product that supports both clients and servers. Just ask Stacey Lum, president and founder of

InfoExpress

, of Los Altos, Calif. He says his company has been shipping a similar product to Fortune 500 companies for more than a year, and he calls the claim in V-One's news release "an absolute lie. And there's nothing they can add to that that makes it truthful."

Of course, who was to know? InfoExpress is a private company that tends to keep a very low profile outside of its own industry. (Which is the case with many private companies that get big-footed by a public competitor.) It was started without venture capital backing in 1993 by Lum, an engineer, and didn't get into the VPN space until 1996. Without venture capitalists breathing down its neck, it has been under no pressure to prematurely go public or sell itself. That has left Lum and his colleagues time to concentrate on developing and selling what they believe is software that is superior to V-One's. In fact, Lum says, he believes one of his customers currently has one of the largest VPN deployments anywhere.

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Imagine his surprise when he saw V-One's press release and the market value of its stock. The hoopla surrounding V-One prompted him to check out V-One's financials, "and we were shocked to see that our run rate is equal to theirs." InfoExpress's revenue, he says, has tripled in each of the past three years. (V-One's, which was $932,000 last quarter, has been falling this year.) What's more, Lum says, "We make money." (As of the third quarter, V-One had an accumulated deficit of $36.7 million.)

Lum, meanwhile, is taking it in stride. "The marketplace knows the difference," he says. "The stock market probably doesn't."

The ultimate in understatements.

P.S.: I received a call Wednesday from someone at V-One, claiming that Tuesday's column contained factual errors. However, that person left a voice mail at my New York office, even though the message on

my

voice mail encourages all callers to call my New Jersey office, where I often work. (Why some people don't follow through is beyond me! I'd say, "Can't they read," but, well ... that's why I check the office voice mail once or twice a day.) After hearing the V-One message, I put in a call to V-One and the person, whoever she was, didn't call back. And I left her the same message I left earlier in the day with the company's anointed spokesperson -- the person whose name is at the bottom of all V-One press releases -- wondering why V-One said it was the first company to ship a client/server VPN software, when it really wasn't. So far, no response. If and when I get one, I'll share it with you.

Short Positions

Featherbrains:

That's what any shareholders who bought into

Boston Chicken's

(BOSTQ)

existing stock must be thinking of themselves now that Boston Chicken is being bought by

McDonald's

(MCD) - Get Report

. I say "featherbrain" because no matter how many times this column harps on it, hope still springs eternal with speculators who believe the stock of a bankrupt company is a bargain and that -- best case -- if the company is bought they'll get bailed out. (

Iridium

(IRIDQ)

investors, who keep thinking

that

company will get acquired, take note!)

As

Kevin Max

, a reporter for the joint

TheStreet.com/NYTimes.com

newsroom, wrote yesterday in an excellent

piece: The purchase price of $173.5 million is barely enough to cover what the company owes its senior creditors. Junior creditors and stockholders will be left with what on Wall Street is often called a bagel, for its shape. (Ironically, Boston Chicken's stake in

Einstein/Noah Bagel

(ENBX)

won't be included in the deal, but with its stock now trading at under 1 it's getting perilously close to looking like the product it sells.)

Conseco capers:

In reaction to

Tuesday's Extra column on

Conseco

(CNC) - Get Report

, reader

Robert Tomeny

writes that "once again," I:

... seem to ignore the facts and report only developments that seem to support your short-selling sources on Conseco. Of all the analysts who follow Conseco, only Salomon Smith Barney's Colin Devine thinks the company is in trouble. He had only one non-biased supporter at Moody's (a very good friend of his by the way) and even that supporter is now gone as Moody's announced they would upgrade Conseco to investment grade following the closing of this transaction and keep it on positive watch for future upgrades. How can you defend your position of one-sided reporting on this company when only one analyst (who doesn't even have access to the company anymore) agrees with you and every other analyst on the street, including analysts from both of the major rating agencies, see a rapidly improving credit story? What do you have to gain from such lopsided and blatantly biased reporting? The truth is that all of the moves you have criticized the company for making in the past year have each resulted in either a ratings upgrades or ratings being placed on positive watch. Hardly how you would expect the rating agencies to react to desperate measures and a deteriorating cash-flow situation as you suggest. As a reader of your column, it would be nice to hear all of the facts reported including those that don't support the profit motives of your short-selling sources.

I understand your concerns, but those short-selling sources, and Devine, have been the

only

ones on Wall Street to get this story right.

Calling all questions:

Have a personal finance question? Don't hesitate to send it our way to mailbag@thestreet.com. Our only request: Include your name. And, sorry, because of volume, we can't guarantee personal replies to questions that aren't answered in the column. And, please, no questions regarding brokerage disputes, or seeking advice or opinions regarding individual stocks.

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.