Old-School Eakle Hypes a Client, With Some Help From Dan Dorfman
Richard Eakle is a busy man.
He’s the president of Eakle Associates, a Fair Haven, N.J., hedge fund advisory firm that counts George Soros among its clients, and he runs a $50 million portfolio he says is up 206 percent this year. A former technical analyst for Morgan Stanley Dean Witter, his views and investment ideas have appeared in The Wall Street Journal and Barron’s , and on CNBC.
But by appearing in a Dan Dorfman article on the Web site Jagnotes on Dec. 6, Mr. Eakle appears to have betrayed his curriculum vitae.
In an interview published that day, Mr. Eakle addressed the overall market’s prospects and cited a handful of stocks he said will double (more or less) within a year.
Mr. Dorfman, the former Money magazine columnist and CNBC contributor, has made something of a comeback after getting fired from Money and CNBC for being linked to a stock promoter who was eventually convicted of fraud. (Mr. Dorfman was never charged.) He ended the Jagnotes piece by letting Mr. Eakle mention something “in a more speculative vain” [sic]: Marketcentral.net Corporation, a New York-based financial news and tools portal that’s trading on the over-the-counter bulletin board.
In the interview, Mr. Eakle called Marketcentral a “mini-Yahoo” and “an undiscovered Nasdaq gem.” In addition, Mr. Eakle said he sees the stock rising tenfold, to between 25 to 30 per share over the next year.
While Jagnotes can take credit for calling this play speculative (if not for misspelling “vein”), it can also take credit for neglecting to note that Mr. Eakle is hired as a consultant to Marketcentral. A Sept. 23 press release from the company labels Mr. Eakle a “heavyweight trader and analyst.”
Almost as soon as the interview was posted on Jagnotes at 1 P.M. Eastern standard time, the stock climbed about 64 percent, to 4 1/2, from the previous day’s closing price before ending the day at 4 7/16. The 136,000 shares traded amounted to about seven times the average daily volume. By the close on Dec. 8, Marketcentral shares were worth 3 11/16.
Richard Eakle’s mere mention of Marketcentral almost doubled the stock’s price in a matter of minutes.
Mr. Eakle has said he told Mr. Dorfman of his relationship with the company, and that Mr. Dorfman may have disclosed it in the past. Attempts to find such a disclosure on the Jagnotes site were unsuccessful. Mr. Dorfman didn’t return repeated phone calls for comment.
It’s a sign of the times that Mr. Eakle, who could be considered a representative of the old-school, pre-day-trading Wall Street, can say he sees little wrong with “taking advantage of the news media” to raise the profile of a stock he sees as a good buy. It hasn’t always been that way, especially for someone of Mr. Eakle’s stature.
He added that he also owns the other four stocks he mentioned in the article, including Abgenix Inc. and Accrue Software Inc. Mr. Eakle doesn’t have any consulting agreements with those companies.
Abgenix, however, has a $1.2 billion market cap and trades in the 80′s, making it harder to push around than a bulletin board stock. (Abgenix did close at 84, up 5 1/2, on Dec. 6 but retreated to 79 7/8 a day later.)
“Besides, the only real difference between a bulletin board stock and a Nasdaq stock is revenue,” Mr. Eakle said. Yep, and the fact that you’re getting paid to talk about it.
Somewhere along the road of this long bull market, such things have stopped mattering, as pros and rubes alike chase performance like so many dogs after a great big firetruck. After all, is there any real difference in a 300 percent runup in a penny stock and the same escalation in a day-trader favorite such as Red Hat Inc.?
Both surges hope to capitalize on bull-market babies searching for the Next Big Thing, or at least the next big trade. And, hey, a stock trading at 2 3/4 is an equalizing opportunity for those who can’t afford the 270 clams a Red Hat share costs.
Mr. Eakle seems undeterred by such factors as Marketcentral’s penny stock origins and almost laughable financial condition–its losses are 35 times revenue, and all the losses are listed as “general and administrative.” Marketcentral has been doing business for less than a year, after completing one of those penny stocks specialties–a reverse merger into a public shell–in February with an outfit then called All American Consultant Aircraft.
Aircraft. Internet. Heck, ostrich farms. It’s all the same.
Marketcentral lists a phone number in Vancouver, Canada, as its main contact. It patches you into Meridian Mercantile, an investment bank that specializes in bulletin-board stocks.
Earlier this year, Marketcentral was threatened with being delisted from the bulletin boards, along with several thousand other penny stocks, as part of a Securities and Exchange Commission effort to get those companies to start fully reporting their financial statements.
On Sept. 22, the company issued a press release saying it completed the forms to become fully reporting. The most recent numbers available on the company were posted Nov. 15, and they reveal that for the six months ended June 30, Marketcentral showed revenue of $5,013 and net losses of $177,181. With about 4 million shares outstanding, that meant a per-share loss of 4 cents.
Mr. Eakle’s role within Marketcentral goes beyond just giving glowing interviews, said Roy Spectorman, Marketcentral’s president. Mr. Eakle’s compensation agreement, which Mr. Spectorman wouldn’t disclose, includes creating an on-line trading advisory service and helping the company raise $15 million in new financing.
“Plus, it adds to our credibility to have his name on the site,” Mr. Spectorman said. “Getting Eakle isn’t easy.”
And for the many who bought Marketcentral at 4 1/2 on the afternoon of Dec. 3, getting “Eakled” wasn’t cheap, either
Robin Williams for Hire
It’s common for major companies and investment banks to recruit celebrity performers to entertain customers and employees at major meetings–and to pay them a bundle. But when comedian and actor Robin Williams showed up recently at the Credit Suisse First Boston technology conference in Scottsdale, Ariz., the funny guy did it for nothing.
Well, not quite nothing.
While First Boston neither paid Mr. Williams nor allocated to him chunks in any of its recent initial public offerings, the comedian has a major interest in the success of one of First Boston’s banking clients, Audible Inc. Audible offers recorded books, news and entertainment over the Web on a subscription basis.
Former journalist and current Audible chief executive Donald Katz said that he approached Mr. Williams about the company and persuaded him to get involved. “He’s a partner, he’s a believer, and all of this is about creative work as opposed to the spokesmodel stuff.”
It also helps that Mr. Williams was allocated 150,000 shares when Audible went public on July 15 at 9. It closed on Dec. 9 at 15 1/2. The comedian also has warrants to purchase another 900,000 shares. In return, Mr. Williams will create original comedy for distribution on Audible. He also seems willing to jet down to Phoenix to help plug the stock.
A Dream Deferred
After its Dec. 7, I-can’t-believe-it’s-not-butter 24-percent move, shares of Yahoo Inc. declined 8.2 percent on Dec. 8, a setback that was expected by many. But then the next day it shot up again 6.37 percent.
Nonetheless, before you go calling your brother’s friend’s cousin who works at Yahoo to ask for a loan, consider this: The window during which Yahoo employees can sell (or buy) shares closed on Nov. 30, the same day Standard & Poor’s placed its holy scepter on the on-line giant by including it in the S.&P. 500 index. Thus, Yahoo employees big and small have been verboten from taking advantage of the stock’s most recent big runup.
A Yahoo spokesman confirmed the aforementioned and said the next window does not open until Jan. 14.
This is a gentle reminder that the gains for big shareholders such as Jerry Yang and Tim Koogle, so breathlessly reported by certain news outlets, are theoretical, and should not cause you consternation because your portfolio isn’t doing as well.
Yet, this tidbit about Yahoo raises another interesting question. While getting information about when lockups of recent initial public offerings expire is possible with a check of S.E.C. filings, there is no formal requirement for companies to detail when employees can (and can’t) trade their shares.
“Companies are adamant about keeping windows fairly quiet,” said Robert Gabele, director of insider research at First Call Corporation.
While Mr. Gabele supports the idea of companies having to disclose the employee-window information, he acknowledged that there is sometimes a need for being clandestine, such as when a merger announcement is forthcoming.
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