2HRS2GO: Lawsuits seem small-minded
This is becoming a trend: watch your stock drop, find a scapegoat, go after posters on Yahoo! (Nasdaq: YHOO) message boards.
Titan (NYSE: TTN) yesterday said it's suing "unscrupulous short sellers" for spreading untruths. The company -- a defense contractor now moving into commercial communications and other tech ventures -- accuses some Yahoo! Finance account-holders of creating a Short Sellers' Scheme (caps courtesy of Titan's court filings), fueled by anonymous "analyst reports" given to shareholders and postings on a Yahoo! Finance message board. Titan also accuses shorts of feeding bad information used in a Barron's article that appeared in early August.
Assuming the examples given in Titan's court filing are accurate, the company has a point, regarding a pair of unsigned reports issued in May and August. Those documents apparently contained flat-out lies about certain Titan units.
But Titan then undermines its own cause by citing recent postings on Yahoo! Finance as "materially false and misleading":
- July 24 - "Very very bad earning surprises coming today?"
- August 4 - "TTN is getting nailed with huge sale orders! Jump from the sinking ship! Have a nice day."
- August 5 - "....I believe we will be picking up TTN under 20.00 real soon."
- August 7 - "...Going Down!...."
- August 9 - "Do not buy TTN until it hits $3-5."
- August 10 - "Friend of mine and he works for huge institution and they are selling TTN..."
- August 14 - "Short more!"
- August 15 - "Good luck tomorrow longs. You will begin wallow back in the 20's tomorrow. How does it feel to be the dumbest stockholders of stock in a company.... When this thing gets hammered tomorrow you are going to get a sick sinking feeling and no one will be around to bail you out."
- August 16 - "Institutions are selling big time!"
- August 16 - "....Has anybody checked the insider status lately ... Gene and Ray baby are probably dumping all of their holdings as we speak."
- August 17 - "Institutions bailing out now."
- August 21 - "Warning! Specialists are painting the tape, big blocks on the sell side come and go but never show up on total shares traded."
- August 21 - "Come everybody can you say - - - fifteen!"
- August 21 - "TTN is breaking critical support levels.... If you think TTN is coming back any time soon, I believe you're sadly mistaken. Looks to me like the large accumulators who are buying from the single digits are out pulling the plug."
- August 22 - "I would guess the bottom to be around $12.00 to $13.00 a share.... TTN should stay in the teens for a long time after the bottom finally hits in my opinion."
Most of these are editorial rants, the usual spewing that afflicts Yahoo! Finance boards. They're viewpoints, often clearly marked as such, as in the last instance. Anyone with a functioning brain knows better than to take this junk as gospel, and in any case, stupid opinions and bad advice are hardly the same thing as "materially false" lies.
Perhaps Titan only included the Yahoo! Finance messages as a means of ascertaining the identities of these supposed shorts. But this whole mess shouldn't be in the courts in the first place.
Whether or not this so-called scheme occurred, there's a far better way to derail it: performance. If Titan cranks out the numbers and surpasses its stated goals, no one will care what shorts say in the long run.
The most disturbing thing about this lawsuit -- and similar ones from other companies, such as Raytheon (another touchy defense contractor) and AnswerThink (Nasdaq: ANSR) -- is that it demonstrates an unhealthy obsession with the company's stock price.
A CEO shouldn't care how shares perform in the span of a few months. I thought these executives get paid for long term thinking.
Shorts might open their trenchcoats on message boards, but so what? Nothing beats rip-roaring performance.
Unfortunately, Titan's government business still generated nearly 83 percent of the company's overall revenue in the latest quarter, and grew at a modest 17.8 percent year-over-year rate. The company's other businesses collectively generated $58.4 million in second quarter revenue, including $7 million from the SureBeam pasteurization and sterilization unit that generated so much publicity.
Growing and promoting those non-government units should be the only concern of Titan management. Going after Yahoo! Finance members just makes a company look petty.
Other issues:
Alloy Online can't be blamed for Wall Street's frown on all online retail, but the fact remains that the company is a niche e-tailer. Enough people have been burned by the sector to justify avoiding it, especially when there are other growing fields with profitable companies that are don't compete with or replicate real world firms. Being online doesn't change the fact that a retailer is a retailer, period.
The means of distribution might be new -- although not all that different from the century-old business of catalogs -- and the shopping area might be surrounded by Web community features, but in the end, it's all about hawking low pocket pants and GI Joe T-shirts. Other than the teens who shop at Alloy, who can get excited about that? 22GO
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