The Deal: Microcap Stocks Get Undeserved Promotions
Direct mail and e-mail campaigns have long been the staple of paid promotions of microcap stocks, but in recent months stock promoters appear to have had increasing success using a potentially more powerful outlet.
NEW YORK ( TheStreet) - Direct mail and e-mail campaigns have long been the staple of paid promotions of microcap stocks, but in recent months stock promoters appear to have had increasing success using a potentially more powerful outlet. Paid stock promotions, masquerading as investment opinion articles and blogs, have been popping up on the company news pages of Yahoo! Finance, the stock research Web site Seeking Alpha and, some observers suspect, on the Website of Forbes magazine.
Articles published in paid stock promotions often forecast massive upside for the shares of companies whose financials indicate only marginal businesses. For Yahoo! Finance, the promotions had become such a problem that it sent a letter to content providers in March stating that it no longer wanted them to send "investment opinion" pieces. "In recent months, there has been a proliferation of investment opinion (INO) releases on the site's Stock Quote Pages via feeds from our press release providers," the letter reads. "These INO releases neither reflect the opinions of, nor are vetted for accuracy and reliability by the editorial team. Moreover, these releases do not constitute legitimate news about the companies on whose Quote Pages they appear. The Yahoo! Finance team has determined that these releases do not constitute suitable content for our users. Therefore, all press release providers must cease the syndication of INO releases to Yahoo! Finance effective immediately. Failure to comply with this change in policy will be considered a violation of our Editorial & Ticker Policies." A Yahoo! Finance spokesman declined to comment further. Press release distribution outlets whose releases appear on Yahoo! Finance include Business Wire, PRNewswire, PrimeZone Media Network and Market Wire, Sunnyvale, Calif.-based Yahoo! ( YHOO) says on its user help pages. In May, Seeking Alpha confessed to readers that five articles it published in March and April that recommended investment in Goff Corp. ( GOFFE) were paid-for advocacy pieces. Seeking Alpha already had a standing policy of not accepting or publishing paid-for pieces.
Goff, based in Medellin, Colombia, purports to be a gold mining company. Its shares traded as high as 65 cents in April, amid a broader stock promotion campaign that included the Seeking Alpha articles. As of June 11, Goff shares traded at 1 cent, over the counter under the ticker GOFFE.