Banker Is on a Mission To Become 'Truth Police'
By
Aaron Elstein The Wall Street Journal Interactive Edition
Updated Nov. 3, 1999 12:22 a.m. ET
Internet message boards teem with people spouting opinions about the prospects of stocks they love, or love to hate. And then there is Floyd Schneider, who says he is on a mission to "expose the underbelly of Wall Street."
Mr. Schneider, 42, an executive at a New Jersey mortgage bank and a father of two, spends most of his day -- up to 15 hours, he estimates -- at his computer prowling the Internet in search of stocks he deems overvalued or hyped. He then publishes his findings in a weekly online newsletter called "The Truthseeker Report" (www.thetruthseeker.com ).
"My role is to find rigged stocks and expose them as the scum they are," says Mr. Schneider, a vice president at Real Estate Mortgage Network in Rochelle Park, N.J., who is developing a reputation online as Wall Street's "truth police."
Though he lacks formal training as a stock analyst, Mr. Schneider's amateur sleuthing has won him a loyal following on the Internet among short sellers -- investors who hope to make money on stocks that deflate. He claims 300 people pay to get his Truthseeker Report, which costs $9.95 a month. Others closely track his postings on Internet message boards.
Mr. Schneider's growing popularity sheds new light on the way the Internet is helping individual investors influence the market. Just a few years ago, individuals with information -- good or bad -- about a specific stock had no broad platform to reach other investors, save for a company's annual shareholders' meeting.
Today, the Internet provides a platform for an individual to potentially reach millions of people. And some amateur stock watchers are developing followings that rival Wall Street professionals.
In about a year, Mr. Schneider has become one of the most popular participants on Internet stock-chat boards, including Silicon Investor (www.techstocks.com ). Because of the surge of interest in his postings and stock recommendations, he decided to publish the online newsletter featuring his stock research.
The Truthseeker Report was launched in August. A month later, Mr. Schneider also began issuing "investment opinions" over Business Wire, paying $350 per release, in which he recommends investors sell or short stocks researched by him. He says he never takes positions in the stocks he writes about -- although he plans to do so after he's solidified his reputation as a stock investigator. "When that happens, everyone will know it," he says. "The Truthseeker tells the truth."
Mr. Schneider isn't registered as an investment advisor with any regulator. However, the U.S. Securities and Exchange Commission requires people who are compensated for recommending securities to more than 15 people to register with the agency. Mr. Schneider says he's never been paid to do research by anyone and the amount he collects from selling his newsletter doesn't cover his costs to prepare and distribute it. A spokesman for the SEC declined to comment on Mr. Schneider's activities.
Except for a bachelor's degree in business administration from the University of Miami, Mr. Schneider has no formal training in securities analysis. His reports, while usually supported by references to public documents, are punctuated by a generous amount of needling. He once called executives of one company, ZiaSun Technologies , "conning, lying, thieving rubes," for example. Not surprisingly, Mr. Schneider's work has drawn some fire.
ZiaSun, an Internet holding company in San Diego, sued him for defamation because of his postings. The lawsuit, filed in U.S. District Court in Seattle in July, is pending. Another company, Sara Hallitex, an Internet venture-capital firm, also publicly challenged Mr. Schneider. The company rebutted Mr. Schneider's charges on its corporate Web site by accusing him of a "smear campaign."
Mr. Schneider's critics say he's an obsessed man who needs a new hobby. He has posted over 5,000 messages on Internet bulletin boards at Silicon Investor, or an average of 14 per day since he signed up in November 1998, plus hundreds more on Raging Bull (www.ragingbull.com ).
"I feel bad for Floyd," says D. Scott Elder, chief executive officer of ZiaSun, which sued Mr. Schneider and seven other message-board posters for conducting an online "defamatory campaign" to hurt the company's stock. "I think he's got to get on with his life -- do something productive. He's not doing any good with what he's doing."
But Mr. Schneider counters that he's providing a crucial service to investors -- and he has a lot of supporters. Although short-sellers are his biggest fans, Mr. Schneider also has drawn attention among a few securities lawyers, who sometimes find his information useful in bringing fraud cases against companies on behalf of shareholders.
Mr. Schneider "is very prolific," says Michael Braun, a lawyer at Stull, Stull & Brody in Los Angeles, which recently sued 2TheMart.com , a company recently profiled by Mr. Schneider. Mr. Braun declined to comment on the accuracy of Mr. Schneider's research.
Mr. Schneider says he paid little attention to the stock market before becoming a "cyber-sleuth." He says his only investment is about $2,000 in a mutual fund. After graduating college in 1981, he returned to his native New Jersey and sold auto insurance until he got into the mortgage business in 1991.
Five years later he opened an account with America Online and discovered its "Shark Attack" chatroom, where people discussed stock picks. He read participants' tips on how to use Internet search engines to unearth public records, such as SEC filings and state incorporation documents, and decided to strike out on his own. "The more I did, the more I learned, and the better I got," he says.
In November 1998, he signed up as a member of Silicon Investor, a popular online message board service and, using the alias "Flodyie," started writing about small companies whose share prices he felt were rising for suspect reasons.
Mr. Schneider says his expose on 2TheMart.com , of Irvine, Calif., is his proudest achievement to date. One of his first targets, 2TheMart.com's stock soared as high as 44 in March after it claimed it was building an online auction site similar to eBay . But the business never got off the ground, despite press releases from management assuring the site was in "final development" and would be available in the second quarter of 1999.
Mr. Schneider had hammered 2TheMart.com, accusing it of keeping crucial information from investors. He also disclosed that the company's president, Dominic J. Magliarditi, was disciplined by the Nevada Bar Association for "obvious conflicts of interest" in negotiating a real estate deal for some partners. The company's shares, which are quoted on the OTC Bulletin Board, closed trading Tuesday at 7 3/4.
2TheMart.com was sued by five law firms on behalf of shareholders for allegedly disclosing false and misleading statements about the prospects of their business. 2TheMart.com officials declined to comment on Mr. Schneider, but have said in a press release that they intend to defend themselves "vigorously" in court.
After 2TheMart.com, Mr. Schneider set his sights on Sara Hallitex , a Marina del Rey, Calif., Internet venture-capital firm. The company's stock had surged as high as 19 7/8 in mid-April after it issued a flood of press releases promoting investments in Internet-related companies.
In his report, Mr. Schneider charged that these companies in fact had little connection to the Web. He put a "strong sell" rating on the company's stock and said he was adding it to his "Unfortunate 100 Index," an index of companies that Mr. Schneider believes will fall in value. Chairman Garrett K. Krause responded by posting a "Response to the Truthseeker's Report" on Sara Hallitex's Web site. The response accused the Truthseeker of a "smear campaign." Sara Hallitex shares closed at 3 7/8 on the Nasdaq National Market Tuesday.
Mr. Schneider frequently taunts executives and so-called touts -- people he believes are stock promoters paid to defend his targets.
Indeed, the main reason ZiaSun sued Mr. Schneider was because officials were so angry by his repeated and obnoxious messages, according to the company's CEO, Mr. Elder.
Mr. Schneider has stepped up his efforts on his "Truthseeker" Web site. He recently started including research on larger companies.
On Oct. 25, he issued a "sell" recommendation on Ask Jeeves , the Internet search engine, and forecast the stock would fall to 15 to 25 in 12 to 18 months. It closed Tuesday at 88 5/8. Mr. Schneider's views aren't shared by Wall Street pros, however. Several firms, including BancBoston Robertson Stephens, rate the stock a "buy." Another, Adams, Harkness & Hill, estimates it will be at 120 in 12 months.
Mr. Schneider says that one day he hopes to make cyber-sleuthing his full-time job. Ultimately, he'd like to sell ads on his site, so he can publish his reports for free. "What I really love doing is investigating companies. I mean, this is fun," he says. "And there is always more out there."
Write to Aaron Elstein at aaron.elstein@wsj.com
By
Aaron Elstein The Wall Street Journal Interactive Edition
Updated Nov. 3, 1999 12:22 a.m. ET
Internet message boards teem with people spouting opinions about the prospects of stocks they love, or love to hate. And then there is Floyd Schneider, who says he is on a mission to "expose the underbelly of Wall Street."
Mr. Schneider, 42, an executive at a New Jersey mortgage bank and a father of two, spends most of his day -- up to 15 hours, he estimates -- at his computer prowling the Internet in search of stocks he deems overvalued or hyped. He then publishes his findings in a weekly online newsletter called "The Truthseeker Report" (www.thetruthseeker.com ).
"My role is to find rigged stocks and expose them as the scum they are," says Mr. Schneider, a vice president at Real Estate Mortgage Network in Rochelle Park, N.J., who is developing a reputation online as Wall Street's "truth police."
Though he lacks formal training as a stock analyst, Mr. Schneider's amateur sleuthing has won him a loyal following on the Internet among short sellers -- investors who hope to make money on stocks that deflate. He claims 300 people pay to get his Truthseeker Report, which costs $9.95 a month. Others closely track his postings on Internet message boards.
Mr. Schneider's growing popularity sheds new light on the way the Internet is helping individual investors influence the market. Just a few years ago, individuals with information -- good or bad -- about a specific stock had no broad platform to reach other investors, save for a company's annual shareholders' meeting.
Today, the Internet provides a platform for an individual to potentially reach millions of people. And some amateur stock watchers are developing followings that rival Wall Street professionals.
In about a year, Mr. Schneider has become one of the most popular participants on Internet stock-chat boards, including Silicon Investor (www.techstocks.com ). Because of the surge of interest in his postings and stock recommendations, he decided to publish the online newsletter featuring his stock research.
The Truthseeker Report was launched in August. A month later, Mr. Schneider also began issuing "investment opinions" over Business Wire, paying $350 per release, in which he recommends investors sell or short stocks researched by him. He says he never takes positions in the stocks he writes about -- although he plans to do so after he's solidified his reputation as a stock investigator. "When that happens, everyone will know it," he says. "The Truthseeker tells the truth."
Mr. Schneider isn't registered as an investment advisor with any regulator. However, the U.S. Securities and Exchange Commission requires people who are compensated for recommending securities to more than 15 people to register with the agency. Mr. Schneider says he's never been paid to do research by anyone and the amount he collects from selling his newsletter doesn't cover his costs to prepare and distribute it. A spokesman for the SEC declined to comment on Mr. Schneider's activities.
Except for a bachelor's degree in business administration from the University of Miami, Mr. Schneider has no formal training in securities analysis. His reports, while usually supported by references to public documents, are punctuated by a generous amount of needling. He once called executives of one company, ZiaSun Technologies , "conning, lying, thieving rubes," for example. Not surprisingly, Mr. Schneider's work has drawn some fire.
ZiaSun, an Internet holding company in San Diego, sued him for defamation because of his postings. The lawsuit, filed in U.S. District Court in Seattle in July, is pending. Another company, Sara Hallitex, an Internet venture-capital firm, also publicly challenged Mr. Schneider. The company rebutted Mr. Schneider's charges on its corporate Web site by accusing him of a "smear campaign."
Mr. Schneider's critics say he's an obsessed man who needs a new hobby. He has posted over 5,000 messages on Internet bulletin boards at Silicon Investor, or an average of 14 per day since he signed up in November 1998, plus hundreds more on Raging Bull (www.ragingbull.com ).
"I feel bad for Floyd," says D. Scott Elder, chief executive officer of ZiaSun, which sued Mr. Schneider and seven other message-board posters for conducting an online "defamatory campaign" to hurt the company's stock. "I think he's got to get on with his life -- do something productive. He's not doing any good with what he's doing."
But Mr. Schneider counters that he's providing a crucial service to investors -- and he has a lot of supporters. Although short-sellers are his biggest fans, Mr. Schneider also has drawn attention among a few securities lawyers, who sometimes find his information useful in bringing fraud cases against companies on behalf of shareholders.
Mr. Schneider "is very prolific," says Michael Braun, a lawyer at Stull, Stull & Brody in Los Angeles, which recently sued 2TheMart.com , a company recently profiled by Mr. Schneider. Mr. Braun declined to comment on the accuracy of Mr. Schneider's research.
Mr. Schneider says he paid little attention to the stock market before becoming a "cyber-sleuth." He says his only investment is about $2,000 in a mutual fund. After graduating college in 1981, he returned to his native New Jersey and sold auto insurance until he got into the mortgage business in 1991.
Five years later he opened an account with America Online and discovered its "Shark Attack" chatroom, where people discussed stock picks. He read participants' tips on how to use Internet search engines to unearth public records, such as SEC filings and state incorporation documents, and decided to strike out on his own. "The more I did, the more I learned, and the better I got," he says.
In November 1998, he signed up as a member of Silicon Investor, a popular online message board service and, using the alias "Flodyie," started writing about small companies whose share prices he felt were rising for suspect reasons.
Mr. Schneider says his expose on 2TheMart.com , of Irvine, Calif., is his proudest achievement to date. One of his first targets, 2TheMart.com's stock soared as high as 44 in March after it claimed it was building an online auction site similar to eBay . But the business never got off the ground, despite press releases from management assuring the site was in "final development" and would be available in the second quarter of 1999.
Mr. Schneider had hammered 2TheMart.com, accusing it of keeping crucial information from investors. He also disclosed that the company's president, Dominic J. Magliarditi, was disciplined by the Nevada Bar Association for "obvious conflicts of interest" in negotiating a real estate deal for some partners. The company's shares, which are quoted on the OTC Bulletin Board, closed trading Tuesday at 7 3/4.
2TheMart.com was sued by five law firms on behalf of shareholders for allegedly disclosing false and misleading statements about the prospects of their business. 2TheMart.com officials declined to comment on Mr. Schneider, but have said in a press release that they intend to defend themselves "vigorously" in court.
After 2TheMart.com, Mr. Schneider set his sights on Sara Hallitex , a Marina del Rey, Calif., Internet venture-capital firm. The company's stock had surged as high as 19 7/8 in mid-April after it issued a flood of press releases promoting investments in Internet-related companies.
In his report, Mr. Schneider charged that these companies in fact had little connection to the Web. He put a "strong sell" rating on the company's stock and said he was adding it to his "Unfortunate 100 Index," an index of companies that Mr. Schneider believes will fall in value. Chairman Garrett K. Krause responded by posting a "Response to the Truthseeker's Report" on Sara Hallitex's Web site. The response accused the Truthseeker of a "smear campaign." Sara Hallitex shares closed at 3 7/8 on the Nasdaq National Market Tuesday.
Mr. Schneider frequently taunts executives and so-called touts -- people he believes are stock promoters paid to defend his targets.
Indeed, the main reason ZiaSun sued Mr. Schneider was because officials were so angry by his repeated and obnoxious messages, according to the company's CEO, Mr. Elder.
Mr. Schneider has stepped up his efforts on his "Truthseeker" Web site. He recently started including research on larger companies.
On Oct. 25, he issued a "sell" recommendation on Ask Jeeves , the Internet search engine, and forecast the stock would fall to 15 to 25 in 12 to 18 months. It closed Tuesday at 88 5/8. Mr. Schneider's views aren't shared by Wall Street pros, however. Several firms, including BancBoston Robertson Stephens, rate the stock a "buy." Another, Adams, Harkness & Hill, estimates it will be at 120 in 12 months.
Mr. Schneider says that one day he hopes to make cyber-sleuthing his full-time job. Ultimately, he'd like to sell ads on his site, so he can publish his reports for free. "What I really love doing is investigating companies. I mean, this is fun," he says. "And there is always more out there."
Write to Aaron Elstein at aaron.elstein@wsj.com
