Who Told You That!?

Most people probably missed it because of the company's size, but a small-cap stock was whipsawed on Monday -- its shares fell nearly 20% before closing down just 10% -- because of a murky, super-secret hedge fund operator who wrote some negative comments on the Seeking Alpha website.

Or not. It's possible that the hedge fund operator, "Liam Mulcahy," doesn't work for a hedge fund at all and, in fact, might not even exist. After being contacted by the company, Microvision (Nasdaq: MVIS  ) , Seeking Alpha pulled the article, and the stock has regained its former price level. All's well, right? Well, there are a couple of cautionary lessons in this saga.

Don't be gullible. First, like your mother used to tell you, don't believe everything you read. Seeking Alpha is a worthy competitor to The Motley Fool in many respects, and its content can often be engaging. Yet while it says it vets all of its contributors, in this particular instance Liam Mulcahy -- who had submitted one article previously to the site -- hadn't yet served up a bio when the Microvision piece went public.

That's why even here at the Fool, as much fact-checking as goes on with each article we post, we urge you to do your own due diligence. Don't rely upon anyone to make your investment decisions for you. That includes your brother, your coworker, the Fool, Seeking Alpha contributors, and especially cold-calling brokers. Microvision wouldn't be the first company dropped by rumor. RF Micro Devices (Nasdaq: RFMD  ) was roiled a few years ago when an analyst spread false rumors while shorting the stock.

Do your homework. Second, don't invest before you think. Microvision makes integrated photonic modules that allow mobile-phone displays to project full-size pictures. The disparaging article apparently said that a rival product made by Texas Instruments (NYSE: TXN  ) and Coretronic division Optoma Technology was currently widely available and had beaten Microvision to market by six months.

If you invest in a stock blindly, simply because you like the story someone told you about its potential, you're more likely to be moved by what turn out to be spurious claims. Optoma had said only last week that its Pico projector -- which can hook up to iPods, mobile phones, and other "ultra-portable media devices" -- will be available only in limited distribution in Europe and Asia later this year and won't have a worldwide launch until 2009. There's no need to trade your stock rightthisminute just because everyone else is moving.

Sometimes the shorts are right. The shadowy figure behind the Microvision story disclosed that he was short the stock -- meaning he would profit if the share price fell -- and so it would be natural for him to have a negative opinion about the company. If he's not who he says he is and he can be tracked down, he might have something to answer for, for trying to manipulate the stock for his profit. Short-selling is legal; stock manipulation (up or down) is not.

Yet not everyone who holds a negative opinion is a short-seller or hedge fund operator. Earlier this week I reported that Yahoo! (Nasdaq: YHOO  ) had censored freelance stock analyst David Phillips, who runs a blog called 10Q Detective, because of allegedly disparaging remarks he made about Raser Technologies (Nasdaq: RZ  ) on the site's message boards. Yet rather than being some anonymous poster, like Liam Mulcahy and many who leave comments on the boards, Phillips has a public record one can follow, having been quoted in publications like The Wall Street Journal, Kiplinger's, BusinessWeek, Investor's Business Daily, and the International Herald Tribune. He currently writes about the energy industry for BNET.com.

While the cases may seem similar -- two analysts writing negative comments about a company -- knowing the downside potential of your investments is every bit as important as knowing the upside.

Final Foolish thoughts
Investing on your own doesn't have to be as complicated as brain surgery, as some high-commission-based brokerages would have you believe. Following a few simple common sense rules ought to be enough to keep you from reacting -- and overreacting -- to innuendo and suggestion while ensuring that when you do place your money with a company, it's not someplace created out of smoke and mirrors.

Don't have time to do the in-depth research yourself? The analysts at Motley Fool Stock Advisor thoroughly vet every stock recommendation. With a 30-day risk-free trial subscription you can see for yourself how accessible investing can be.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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  • Report this Comment On June 27, 2008, at 6:33 PM, glenlake46 wrote:

    "After being contacted by the company, Microvision (Nasdaq: MVIS), Seeking Alpha pulled the article, and the stock has regained its former price level."

    Gosh, thanks for pointing out that the stock has regained its former price level. And what, I wonder, led you to that conclusion?

  • Report this Comment On June 27, 2008, at 6:45 PM, PaulAnderson27 wrote:

    Great Advice. Here are a few things to keep in mind about the Seeking Alpha article in question:

    You can say anything you like if you're willing to give up the pretense of credibility (look at most Yahoo! posters), but if you want people to take what you have to say seriously, then you need to be able to back it up.

    Apparently, Seeking Alpha has decided to jettison any credibility it might have had in favor of becoming known as the outlet for fantasy-based, unsubstantiated ranting. If the site decides to republish the calculated lies of a basher without providing any substantiation for the following claims, then in my opinion, the editors are negligent, because a brief amount of research on their part would have revealed:

    The lie: "Texas Instruments just beat Microvision to the market (by at least 6 months)."

    The truth: - Microvision and Texas Instruments both plan to introduce limited quantities of pico projectors late in 2008 with a ramp up in early 2009. Optoma's pico projector is not currently available for sale (notice that it doesn't even have a model number or a product name), so the company hasn't "beat" Microvision to the market at all, much less by six months.

    The lie: "TI/Optoma solution is more than twice as bright as Microvision's ... As far as color saturation the two devices are essentially equal, but because TI's solution is twice as bright, the image appear much more vivid."

    The truth: Microvision's solution has 2.6 times the pixels of the TI/Optoma solution. Both devices output 10 lumens of brightness, and the Microvision solution has 150% of the TI device's color range. The products are not even "essentially equal" - the Microvision device is clearly superior. Think DVD quality (Microvision) vs. VHS quality (TI/Optoma).

    The lie: "Texas Instrument's solution is available in mass quantities today"

    The truth: Limited quantities will be available later this year. More are planned to be produced next year - Microvision has announced the same schedule for releasing its device. What model number would I use to order the "mass quantities" that are available today? ...? ...that's what I thought.

    The lie: "Our sources confirm what Detwiler was reporting on Friday. Microvision has yet again delayed the original shipment date of the "Show'"

    The truth: Microvision's annual shareholders meeting was held on Wednesday of this week, and representatives of the company reiterated their plans for bringing pico projector products to market in limited quantities before the end of this year with increased production during the first quarter of 2009. Apparently "Detwiler" missed that memo. Do you guys actually get paid for this kind of "research?"

    The lie: "Importantly, the Texas instruments solution is based on LEDs and thus isn't subject to the same regulatory safety restrictions that lasers fall under. This means that, Texas instruments is able to offer OEMs a viable roadmap to deliver massive quantities of brighter (2x-10x brighter) and cheaper pico projectors than Microvision could ever theoretically deliver with lasers."

    The truth: The author gives no evidence to support any part of this statement. Microvision's SHOW is a class 2 laser device - as safe as any laser pointer, and probably safer than most business and home theater projectors. Lasers that produce visible wavelengths of light, which trigger the eye's blink reflex, are typically considered safe. Unless Microvision is planning to release a product with an ultraviolet laser (which no one could see), this isn't a real concern.

    The lie: "Investors in Microvision need to see the light and realize that the dream is rapidly becoming a nightmare."

    The truth: Readers of Seeking Alpha need to "see the light" and realize that this outlet has just reduced its credibility to the level of an unmoderated Yahoo! message board.

    Check out the following links to see the spec's of both products and their launch plans for yourself:

    The MVIS SHOW spec's are here: http://www.microvision.com/pdfs/show_specs.pdf

    the closest thing I can find to an official 'spec sheet' for the Optoma pico is here: http://www.optoma.co.uk/uploads/press/18-06-2008_PR-P-en-GB....

    ...and it does not include lumens,or resolution, or color gamut - which is odd and may be a sign that this device isn't quite ready for delivery as some would have us believe. Because there is no better data available, I looked to an interview by display blog as the source for Optoma spec's: http://www.displayblog.com/2008/06/19/optoma-pico-projector-...

    Make up your own minds, folks. Don't get fooled.

  • Report this Comment On June 29, 2008, at 5:19 AM, learner123 wrote:

    I actually heard that rumor has it fool.com was behind the article! Trying to mess with the competition, it seems.

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