Task Taken to Task

But reader feedback about Pacific Century still proves his point about frenzied trading.
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Read tonight's earlier TaskMaster column.

Pacific Century CyberWorks, the Sequel

SAN FRANCISCO -- Many thanks to all who replied to

last night's piece about

Pacific Century CyberWorks

(PCCLF)

, although I can't say it was the most pleasant of "virgin" experiences.

Several readers took me to task (pun intended) for "failing to do my homework," "lazy" reporting and even "ignorance" (among the printable comments). Among the big sins was my failure to mention that Pacific Century was founded by Richard Li, a well-respected, well-connected executive who happens to be the son of Li Ka-shing, the world's 19th-richest man. Or that David Wetherell, CEO of

CMGI

(CMGI)

, which owns a minority stake in Pacific Century, made positive comments about the firm during CMGI's annual shareholders meeting last week.

When I wrote that information about the company was "sketchy," I wasn't referring to that kind of material (which was available). Rather, I referred to info on why the stock soared over 100% yesterday on such heavy trading. Nor did I intend to imply that Pacific Century CyberWorks was guilty by association because of its bulletin-board listing. With over 8.8 billion shares outstanding, the firm has a market capitalization of $20.7 billion, reflecting its status as one of Asia's biggest Internet plays. (You can learn more about the company and its parent,

Pacific Century Group

, at its

Web site.)

However, even the most zealous defenders of Pacific Century failed to provide a compelling rationale for the stock's standing-room-only ascent Wednesday, unwittingly proving the intended point of the column: Many people (like my friend "Lou") were investing in this stock based on little more than faith in the tips of friends and the extremely forgiving nature of this market. For those who know the story inside and out and have invested based on prudent due diligence, more power to you. But the fact that 81 million shares traded leads me to believe there were investors who don't fall into that category.

This morning,

Reuters

reported the stock was up yesterday because of "market speculation that Pacific Century CyberWorks was planning a share swap with

Microsoft

(MSFT) - Get Report

," and would do a reverse 4-for-1 stock split to help facilitate a listing on the

Nasdaq National Market

.

Finally, something tangible to explain why the stock moved like it did, which is all I was looking for (I swear).

The story went on to say Pacific Century issued a statement denying it was in talks with Microsoft regarding a share exchange. Today, Pacific Century CyberWorks fell 20% to 2 3/16 on 42 million shares.

Meanwhile, I'm especially grateful to those readers who supplied additional information about the company, including copies of the "mythical"

Merrill Lynch

report and another one from

Goldman Sachs

.

Merrill Lynch did initiate coverage of the Hong Kong Internet incubator with a buy rating. But that was back on Aug. 31, not recently, as suggested by some chat-room filings. Also, Merrill's 12-month target was (and remains) 8

Hong Kong

dollars (1 1/32 U.S.), not $10, as chat-filers indicated. On Nov. 25, Goldman initiated coverage with a market outperform rating and a target of 10 Hong Kong dollars (1 9/32 U.S.).

The potentially misleading info being bandied about in the chat rooms furthers my intended point about how so-called momentum trading can often become a game of "phone tag" played with high stakes.

Speaking of which, Lou reported today having sold half his shares, recouping his initial investment.

"Any gains now are 'free money,'" he wrote.

May we all be so blessed in the new millennium.

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

taskmaster@thestreet.com.