This story used to be about a company called NexOptic. Then stuff happened…
One of the big knocks on the Venture Exchange, and the various industries that swirl around it, is that the average investor finds it tough to figure out where to source good information.
In a perfect world, there’d be a place where all company filings were easy to go through, track, and research, with high tech email updates when something changes and easy cross-referencing and the ability to follow people from company to company, to see their wins and losses, their fines and exits.
Instead, we have SEDAR.com, which is so hard to use and, frankly, prehistoric, you’d be forgiven for assuming the intent of the thing is to dissuade folks from actually doing their due diligence. I mean, have you seen this thing? Nothing about it appears to have been coded this century – literally. You half expect to see an animated gif of a mailbox and flashing text. It’s the Myspace of public markets tools. It’s what happens when the government says you need to put public company documents online, and the organization tasked with doing so would prefer that doesn’t happen.
So the average investor either has to leaf through PDFs and captcha challenges trying to find actionable information, or find something easier. Many go to websites like SeekingAlpha.com, which was just last week hauled into the the SEC, when it was determined people were writing stories there promoting (and otherwise) companies without disclosing they had a conflict in doing so.
From Bloomberg:
SeekingAlpha.com tries to ensure that research published on its popular investing website is unbiased by requiring writers to disclose whether they’ve been paid for touting stocks. But U.S. regulators say there’s an easy work around: lying.
On Monday, the Securities and Exchange Commission sued 27 individuals and companies for their involvement in hundreds of conflicted articles that appeared on SeekingAlpha and other sites. The authors checked a box that said they hadn’t been compensated, concealing the payments they’d received from stock promoters, the SEC said in a statement.
To hide their identities, writers used multiple pseudonyms, even creating separate personas who claimed to have 20 years of investing experience. At one promotion company, writers even signed a contract forbidding them from disclosing their compensation. SeekingAlpha wasn’t accused of any wrongdoing.
“These companies, promoters, and writers allegedly misled investors by disguising paid promotions as objective and independent analysis,” Stephanie Avakian, acting head of SEC enforcement said in the statement.
When this story came out, a few of us around the office had a good old chuckle that anyone still used SeekingAlpha for research, because the place is a shorters’ paradise. It’s renowned as a place where shortsellers do their trashing of companies they have a stake in.
There are other places as bad – newsletters run by folks who have to run multi-page disclosures warning they can’t be trusted, news sites run by people behind the deals they’re writing about, Twitter touts who’ll tell tens of thousands a lie and wait for tens of hundreds to retweet it. The Google Finance page for any public company has a ‘news’ section, and about half of that section is filled with fake financial sites filled with robot written garbage. When a company drops 10% in a day, those sites will pound out auto-written ‘Has company X imploded?’ headlines.
The market is not properly set up for honest news to be up front and foremost. So the average investor has to dig deeper to find trustworthy sources.
We like to think we’re beyond that morass of bullshit. We’re better. It’s our brand. Honesty above all else, even if a marketing client gets caught in the crossfire. Trash those that need to be trashed, praise those that deserve praise, and verify before you brand someone one thing or another.
Today we slipped up on that front.
One of our guys wrote and published a story without putting it to review, and it turned out that the majority of his take on the deal was a SeekingAlpha piece that, upon analysis by a few of us in the back office later in the day, we think is part of a short attack.
Some of the points in that original piece are valid. Questions over the likelihood of that company’s tech to get to monetization that warrants a $150 million market cap are valid. There’s been insider selling. Patents are still pending. All fair.
But the harder you’re about to swing, the more you need to properly line up your shot, and this story was swinging like Tyson from the first few lines.
I’ve worked at some of this city’s finest journalism institutions and I’ve seen it happen before at all of them, including to guys who are legends in the industry. The sniff of a story with some blood around the edges can see a writer rush to publish without that one extra step to double- or triple-confirm. It can be boring, this factchecking thing, but it’s as important in a story about a cat stuck up a tree as it is in a story about companies with nine figures of value attached.
It’s happened to me. It’s happened to people I consider far superior to me. If you don’t inspire anger in your audience as a journalist some times, you’re not trying hard enough, but you need to know, when that anger hits, that you’re bulletproof. You have your sources, and you know those sources are straight.
Today we ran a story in which the prime source was a SeekingAlpha piece that the editorial staff don’t trust to be straight.
That’s fine – we’ll often take a ‘there’s smoke, let’s see if there’s fire’ approach to third party articles that claim bad goings on at a public company. It’s our job to take them seriously, until we find they shouldn’t be. God knows we’ve spent a lot of time starting a story based on what some rando has said, only to call it quits on that story before it gets published because it doesn’t part the El Stinkerino test.
To that, the story published today was a fast and furious beatdown that we just couldn’t hang with. And so we – at first – edited it down to things we figured were justified, before finally just deciding the better option was to step back and start afresh. When your cheesecake recipe is going wrong, adding more cheese will never really get you back to square.
Over the last month or two, we’ve delivered some cracking destructions of companies we thought – justifiably – were doing bad things, and the writer of this piece was a part of both of all of them. We called Saint Jean Carbon (SJL.V) liars for claiming they had an offtake deal with Panasonic, drawing much heat from investors as the share price plummeted, but we were proved right when the company was told to tell the truth, and insiders were investigated by regulators for insider trading.
Then we tore into Imagination Park (IP.C) for throwing so much helium into their news releases that you could ride them to Montreal and, again, insider trading allegations. Again, this came with much annoyance from investors, and once again we were proved right when the company admitted it was taking a moment to let its insiders know exactly what insider selling was and that it’s a bad thing.
We can go deeper into a whole raft of companies we’ve lit on fire before that, and we’ve never yet been in a position where we weren’t prepared to stand in front of a corporate lawyer and dare them to sue us. When you’re equipped with the unassailable truth, your balls grow to a fine size.
Today, a few things happened. A story went up too early, the story wasn’t sourced the way it should have been, and from what we can see upon spending a day digging deeper, the story was based far too much on bad source material.
Short sellers have an easy game. They can say what they want, largely anonymously, without disclosing their position, and investors will often jump on that, either because they believe the beatdown to be true, or because they figure enough other investors will believe it that the stock will drop accordingly.
I’ve found many a good story on Seeking Alpha, but it’s a dangerous game, like the first guy who shucked an oyster, or a whistleblower in the US military. You really want to be sure you know where your upside is.
At first, we considered taking the story down, but as another short seller piece landed on SeekingAlpha shortly after, presumably noting our piece and deciding to capitalize on it, we realized that would be seen as ‘fishy’. While we wanted to correct the situation, we were cognizant of the fact that the perception from many would be that the company had got to us somehow, which would put the shorter sellers in an even better position to continue hurting their target.
So we edited the piece, doing some more due diligence and finding both positive and negative points to add to it. But then you’re faced with the ‘they’re changing the story’ crowd, which again read more into the changes and began feeding the conspiracy theorists.
So I called someone loosely connected to the company (the company proper had gone to radio silence, on legal advice) and had a chat. That discussion backed our suspicions – indeed, the company was being short-attacked, and not in a small way, and while we were told by this arms length party ‘there are things the company could tell you that would legitimize their tech, but they’re not public yet’, for mine, it was time to just yank the thing.
We’ve never mea culpaed on this site yet, because of our track record of getting it right, even when we’re punching downwards, even when we’re faced with a storm of abuse from true believers. We’re journalists. Our job is to put bums on seats, but with scandal we can stand behind, not manufactured bullshit.
Today’s story slipped up. It was the writer’s fault, but also our fault. It was the system’s fault, but also our fault. It was the short seller’s fault, but also our fault.
It’s easy to pick a company to pieces. We’ve seen no end of good companies that have strong due diligence and real business, get destroyed by sometimes months of sustained short selling. We’ve seen companies with great news releases have those news releases ignored because they’re drowned out by flaming hype in the other direction.
We don’t short companies and never have. It’s a stated position of the company that we don’t short anything, whether we’re writing about it or not, because though shorting helps bring liquidity to the market, it’s bad juju. When you bet against a company, you’re betting against a lot of innocent people who stand to lose money – and you’re bringing that loss about at an accelerated rate.
So any time we unwittingly become a tool of short sellers, we’re going to shut that shit down.
Legally, it’d be in our best interests to just kill the story and move on. From a PR standpoint, likewise. If we did, by Monday, the short sellers would be claiming that we’d been ‘got at’ by the company – ‘paid off to continue the pump.’
We don’t play that way. We have nothing to hide and we’ll take our lumps when we get it wrong. We’ll also offer a forum to get the other side out, so we’ve offered the company the right of reply, and that offer will stand long after the short sellers are gone.
If any of this pisses you off, fair play. We honestly can’t possibly do what we do without sometimes having to take a stance that’s unpopular, and no journalist worth their salt can avoid sometimes finding himself on the wrong side, even when they think they’re god’s messenger. On the markets, there are way too many people with conflicts of interest, conflicts of morality, and conflicts of law to not get stung by relying on one occasionally.
We like to think we’re the good guys. So we’re playing this one like good guys.
Our bad.
— Chris Parry
Founder, Equity.Guru
To quote you… I am kind of unsure that you are qualified to have an opinion on a stock that promotes a scientific advancement that you know virtually nothing about. Yet, you seem to have a very strong opinion about it. Maybe you should stick to writing about things you understand instead of shamelessly bashing a new tech based on a thread you read in a forum of amateur astronomers. I should also mention, that there is no such a thing as a lense that has no aberrations. That is why most telescopes need a long series of lenses and still produce images that look better after being processed. Anyone who invests based on your simple analysis probably should leave their money in a savings account.
Interesting that you have now softened the name of this article… doesn’t change the fact that it is bordering on slanderous though. If, as you say, you are unclear… why are you bashing the stock as zealously as you are?
Hey Donovan,
Gaalen is free to write whatever Gaalen wants to write, but as this is my site, I read everything posted, and when I read this I considered it to be over the top on some points, so I asked him to take the edges off. I don’t think he’s wrong about the company being vague and the investment opportunity being not m’fave, but it’s a fair criticism to say it was harsher than it should be.
That said, so are accusations of slander. He doesn’t like the stock. He’s allowed to say that. From my side, I just want the case to be stronger.
Chris he has no proven facts. It is an opinion but he has no right to say that it should be taken out of the boards. The company is actually in discussions with another company working on bringing out the tech. But Gaalen wouldn’t have known because I just found out myself when I called the company asking if it was true Mac Donald Detwiller which is a really big Canadian company attended the unveiling. Do you think people would go to an unveiling if this is a hoax. You can say that things are vague like you said fine but what right does it give to Gaalen or to you to think that this company doesn’t deserve to be on the boards and it is still be called a scam–whether directly or implied. You guys need to get with it. Very poorly written to say the least. When people call companies scams “frauds” by the way they are opening themselves up to a slander lawsuit because nothing is proven–so until and unless that is the case–you guys need to watch yourselves in how you write it because when companies prove themselves and if people don’t either retract certain inflammatory things to start with and later offer an apology that they are wrong I would actually encourage companies to sue people like you!!! Anyways, the Seeking Alpha article is just as poorly written. You guys need to do a way better job my friend! Yes, people can express their opinions but should avoid saying what is being said unless proven otherwise because that is legally called slander!!! I’m sure you should know this.
Thanks, I appreciate that. However, for some reason, he is all focused (pun intended) on the clarity of the pictures… while failing to note that the purpose was not to create a better image than the telescope, but to demonstrate that the focal length can be far shorter with the prototype. Have you fools never carried a camera with a great big zoom lense around? Ever actually delve into what makes a telescope, or a microscope, work? Did anything on NexOptic’s website confuse you about the purpose of this fledgling technology?
You both write like intelligent men, and yet, you are either missing the point and thus the future applications of this development completely, or, you have an agenda of your own to pursue. I lean toward the latter, considering the evidence you have shown me.
Myself, if I “didn’t like” a stock, I would probably not bother to write about it. So, what is your motive, and why are you worried enough to change what he originally published?
It’s our jobs to write about stocks we don’t like. That’s the concept. A journalist doesn’t need to have been a victim of a mugging to write about a mugging taking place.
Look, when a story is contentious, as an editor, your first step has to be to assume your writer did the right things. Then you dig, and as you find things that are unfair, you’ve a duty to the reader to say so, which is what we did.
Through the day, however, we dug deeper into the allegations that a sustained short attack is hitting the company, and we agreed that too much of our story was influenced by those stories. So we yanked it.
Important to note that as the day rolled on, buying of the stock increased, so if anything it appears this all put more eyeballs on the stock. And we’ve subsequently pushed deeper into the short attack and believe that’s a far bigger story than whether or not NexOptic’s website is clear enough.
We copped some abuse over the day, but we also received some very well thought out and well presented defenses of the company, and those have ultimately fueled how we evolved the story going forward.
Clearly the original article Gaalen wrote had no credibility or facts to prove the claims. Its difficult to take anything so seriously when a supposed investment author has to resort to harsh language, not very professional in anyone’s standards.
I have invested with NXO from the beginning, have continually over the past 2 years done my DD and followed the great team and management at Nexoptic and Ruda Cardinal develop this amazing and proven technology. It was a pleasure and privilege to attend last week’s public unveiling event and shakes hands with Paul, John, Darcy, Larry and Stephen. The prototype works, the science is proven, all that attended the function got to witness firsthand what the Blade Optics capabilities are. No question this will truly become the next evolutionary paradigm shift in how the Nexoptic technology will change the optics world and become a fundamental part of technologies we can’t even imagine today.
“The highest form of ignorance is when you reject something you don’t know anything about” Wayne Dyer
Any skeptics, non-believers do your DD, the information is available for anyone to research and validate. Donovan and Samir, thank you for your support, NXO is strong with focus and leadership, many new and exciting progress and news will be announced in the near future.
I sold my NXO stock today largely based on that article, but then it dropped, so even though I’m not happy from an authorship integrity standpoint, there’s a good chance by Monday morning I’ll be able to buy back in cheaper. Hard to be that upset but I guess I’m still a bit conflicted about the whole thing. That being said I appreciate you (Chris) owning up; still a loyal follower…
there is no longer a disclaimer about positions or compensation from the company
There is no longer a disclaimer about compensation or a position, as they have paid excessively for promo can you conf you have no position and have not been compensated
The situation remains the same. No stock, no payment, no conflict.
I appreciate the retraction. I think, if you really have any interest in repairing any damage your article has contributed to NXO, you really should do a very in-depth and unbiased article about the company. Be thorough, be reasonable, be particular, and learn about the technology and why it is not the same as a whole wall-full of tiny cameras working together. Nothing is guaranteed, but I think that as far as venture stocks go, this company has big potential with a high chance of being realized. Nobody denies that it is a high risk, and therefore high reward investment, but a lot of people have recognized what the future could hold for this one and that is the only reason it has not been shorted right into the ground already…
Thanks for being human. Not enough people are willing to admit a mistake so publicly.
Everyone needs to stop whining about this article. If the allegations made by SA short sellers are true then NXO has a lot more to worry about than negative internet opinion – think OSC/SEC.
That is the problem, Don Juan. I “whined” about this article because it was a biased and ill-researched hack job. The allegations are completely untrue… rumours spread by short sellers to drive the price down. Not an uncommon strategy at all, but, the site discovered that there are a lot of investors who believe in this technology and the company. I have no issue with a journalist having an opinion, but if they plan to share it, they should back it up with some facts. Not just badly plagiarize an article on Seeking Alpha that show no sources nor factual information to back up the claims made. Both this article and the one on Seeking Alpha were created to back up short sellers, who have been attacking NXO for a few weeks now. There is a certain foodie in Toronto who seems to be leading the pack in that regard. Some people have no problem scheming to steal people’s savings so they can eat at fancy restaurants and gloat about it online…
I try to stay as objective as possible and snarky prose aside I fail to see anything that is factually unsupported here or in the SA articles. Do you know what the long term success rate is for defeating an established short seller? Hint: very, very low.
I first heard of NexOptic Technologies through an Equedia Investment Research suggested article on my Facebook feed. I didn’t order this, but my background is optics (AAS in LEOT), so I had a look. The article was way TL;DR, I determined after I slogged through screens of inane babble. It didn’t take too much longer to decide that this whole thing stinks.
Any “stock” that is based on hype and babble by some brain-dead twit trying to drive up (or down) excitement is not worth anyone’s money. The people hyping purchase of this stock are as bad as any of these supposed “paid bashers” short-selling the stock. It’s prostituting a stock, not offering investment advice. Speculating is garbage.