Ticker confusion drives up tiny stock

A small Web site developer says its shares soared 76 percent after investors apparently got it confused with another company.

Feb. 6, 2002 6:09 a.m. PT

3 min read

WASHINGTON--E-Commerce West saw its shares soar 76 percent last week, on its biggest trading volume in more than two years, after investors apparently got the tiny Web site developer confused with another company that's planning an initial public offering.

Deadwood, South Dakota-based E-Commerce trades under the ticker symbol ECOM. On Wednesday, an electronic billing and payment systems provider called Princeton eCom filed for an initial public offering, saying it would seek permission to use the ECOM symbol when its shares eventually start to trade.

The next day, E-Commerce's lightly traded shares jumped 25 cents, to 58 cents, on almost 18 times their average trading volume for the past six months. It was the second such incident this week: Appian Technology, a company with no active business, saw its shares skyrocket Monday to 20 cents, from less than 1 cent, after AppNet Systems filed for an IPO with plans to list under Appian's current APPN ticker. Appian's symbol was changed to APPG.

"It causes a great deal of confusion in the marketplace," when companies announce plans to go public with symbols that are already being used, even though companies filing for IPOs obviously aren't yet trading, said John Elliot, E-Commerce's chairman and chief executive.

Some investors clearly saw the news on Princeton eCom's stock plan and mistakenly put in orders using the ECOM ticker symbol, only to buy E-Commerce shares instead, Elliott said. Day traders, who buy stocks on price momentum without regard to the company behind the symbol, exacerbated the problem, Elliott added.

"They're not overly sophisticated investors," he said.

The CEO said the mistake bears serious consequences for his company, which aims to build a collection of niche Web retailing sites, starting with its eChristmastrees.com site selling Christmas trees.

E-Commerce's volume Thursday was 442,600 shares, compared with its average daily volume of 25,081 over the past six months. That could create a selling frenzy when investors realize they bought stock in the wrong company.

"Four hundred thousand shares hitting the market right now would be devastating to a company of our size," Elliott said.

What's worse for E-Commerce is that Nasdaq plans to take the ECOM symbol away from the bulletin-board traded company and give it to Princeton eCom for a listing on Nasdaq's national market, Elliott said. Nasdaq officials maintain that stock symbols are property of the market, not the company, he said.

"I don't think it's right," Elliott said. The symbol is imprinted on the company's stock certificates as well as its employees' letterhead and business cards, he added. "When we were awarded the symbol nobody told us we could lose it."

Nasdaq officials expressed sympathy with his plight, when the CEO contacted the market to alert officials to the unusual trading, Elliott said. The company also issued a news release Thursday to alert investors that it suspected a mistake had caused the heavy trading.

Nasdaq couldn't be reached for comment, with stock markets closed in observance of the Good Friday holiday.

E-Commerce hasn't decided what new symbol to adopt. Elliott said he doesn't know when the switch will take effect.

"What happens if, six months from now, somebody else decides they want our new symbol? Do we go through this again?" the CEO asked.

The last time E-Commerce shares saw heavier trading than they did Thursday was on March 26, 1997--in another case of mistaken identity. Until a name change last August, E-Commerce was known as Royal Casino Group, trading under the symbol WINZ as it worked to develop a riverboat casino in Missouri.

Its shares plunged more than 30 percent, to 61 cents, on volume of 468,400 shares after an unrelated company lost a court case over its plan to open a Mississippi casino named Royal Casino.