It is said in legal circles that the wheels of justice turn, but they turn slowly. That must be the principle by which the Securities and Exchange Commission operates. They suspended trading on 26 firms the other day for failure to file timely financial reports. While most companies were small and not exactly household names, two in particular caught my attention: DrKoop.com and Webvan.
These two were darlings of the dot.com era. However, they also went bust in the subsequent market implosion and filed for bankruptcy in 2001. At one time, DrKoop.com -- named for the former U.S. Surgeon General C. Everett Koop, who was paid $10,000 for the use of his name -- was valued in excess of $1 billion. It ended Wednesday, before trading was suspended, at a share price of nine one-hundredths of a penny. Webvan, the former online grocery delivery service, had been valued as much as $1.2 billion in its heyday.
In the movie Butch Cassidy and the Sundance Kid Paul Newman and Robert Redford are pursued all over the west by a posse whose members seem to have the incredible ability to track them over all sorts of terrain. The outlaws' constant refrain: "Who are those guys?" One might ask the same question regarding DrKoop.com and Webvan: Who are those guys who traded 1,300 shares of DrKoop.com and 165 shares of Webvan?
The DrKoop.com website is still up and running, though there is a disclaimer at the bottom of the home page noting it is not associated with the former surgeon general. The domain has changed hands a few times since the original company ceased operations and is now operated by Choice Media.
It is unknown what happened to Webvan once it ceased operations. It's a rather ignoble end for a company that had attracted more funding at the time than any company besides Amazon.com (NASDAQ:AMZN). It raised $375 million in its IPO and had such high-profile backers as Benchmark Capital, Softbank, Sequoia Capital, and Goldman Sachs (NYSE:GS).
The SEC said the failure to file quarterly and annual reports means there is little accurate, current information about the companies. Well, duh! And what does it mean when there is little timely enforcement action against companies that fail to file?
In June, the Commission began halting trading on companies that were delinquent in their filings. This action was intended to show that it would not tolerate companies disregarding its listing requirements. Now, it's not uncommon for companies to ask for filing extensions; the proxy research firm Glass Lewis reports there were 61 companies with market caps in excess of $100 million that requested an extension on filing their quarterly and annual reports this past September. But some of the companies at the forefront of the SEC's latest action have not filed reports since before 2000 -- and one, Amitelo Communications, has not filed a report since the end of 1995.
As to why it took regulators so long to crack down, the SEC would not comment beyond its written statement that "when companies fail to make their filings, investors can get hurt." Yeah, thanks.
Seems the SEC is just spinning its wheels.
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Motley Fool contributor Rich Duprey enjoys smoking the rear tire of his Harley. Thankfully, he does not own any of the stocks mentioned in this article.
