Beware the Bloggerwocky

With the proliferation of financial blogs it is becoming increasingly difficult to determine the credibility of supposed financial gurus and their stock recommendations. Compounding this is that popular Internet portals are publishing blog posts that appear to have compelling information but in reality are simply the regurgitate of already-public information (i.e., news releases, corporate Web sites, SEC filings, etc.), often with a little extra hyperbole to further entice the reader.
 
Public companies like to see their stocks go up. And glowing remarks are usually welcome, wherever they may come from. But what happens when an uninformed or even malicious blogger with a reasonable following begins to spew negative information? All of a sudden you find yourself at the mercy of an online smear campaign.
 
But before the vitriolic ping pong match begins, do your homework. Identify the source of the information. Study the extent of their “news” delivery platform. Google them. Use sites like www.alexa.com to see who else links to their blog. Study social networking sites, too. This will give you a reasonable sense for the author’s credibility. Then assess the content. If you find factually false and misleading information, there may be grounds for libel. If there are no factual errors and the source is simply expressing his or her opinion, make sure the context of the opinion is not written as a fact reported by the company. Look for transparency and see if the source discloses whether they are shareholders, long or short. This may provide further insight into their motives. And finally, be prepared to issue a formal statement to correct any misinformation before it spreads on the Internet. Nonsense verse can be fun and even enduring but when it challenges a company’s hard earned reputation, it may be time to remove that vorpel pen, go snicker-snack, take the bloggers head and go galumphing back.

— Evan Pondel, epondel@pondel.com