Why Is Netflix Supporting A Penny Stock Touter?
Last year, I saw that Steve Swasey, Netflix’s Director of Corporate Communications, granted an interview with an investment website named WallSt.net. At the time, the site had erroneously claimed that Netflix was planning on unveiling a movie download service “shortly”, when Netflix had in fact, just told investors that they were scrapping their plans for a Netflix / TiVo service for the indefinite future.
When I pointed out the error in the company’s reporting, rather then making a public correction and admiting that they were wrong, they instead silently changed the story to remove the language that was in the original article.
Being interested in Netflix, I had registered with WallSt.net, in order to listen to the interview. Unfortunately, I quickly found the email address that I had used was overrun with penny stock spam. While I have no way of knowing whether or not WallSt.net was behind the spam, I did find it interesting to note that several of the companies that pay them to promote their stocks were included in these emails.
Regardless of whether or not WallSt.net was responsible for sending out the penny stock spam though, it’s clear that the company uses press releases as a tactic to tie legitimate companies to illiquid penny stocks that they have a financial interest in promoting. At the time of their first Netflix interview, they had issued a press release that appeared on the Netflix business wire, that included a mention of Teleplus Enterprises (TLPE.OB) in the headline. Since that date, Teleplus has lost over 52% of their value.
A few days later, WallSt.Net issued another press release on the Netflix business wire, promoting their Netflix interview yet again and this time referencing a company named Securac Corp. (SECU.OB) and China Mobility Solutions (CHMS.OB). Since that time Securac has lost 91% of their market value and China Mobility has lost 80%.
At the time, I had dismissed the interview as an honest mistake by Swasey and had assumed that Netflix would not have initially provided them with the interview, had they known about WallSt.net’s penny stock tactics beforehand. After seeing them abuse their coverage of their initial interview to tout these penny stocks, I had assumed that Netflix would cut off communication with their firm, yet earlier this week, I was suprised to find out that Steve Swasey has yet again, given another interview to WallSt.net and this morning, surprise surprise, WallSt.net issued another press release to the business newswires, reminding investors that they have an update on Checkpoint, Netflix and a company named Infinix Corp (INXR.PK). Infinix is a penny stock that trades on the pink sheets that has convienently agreed to pay WallSt.Net $3,150 for “media and advertising services.”
Now I don’t know anything about Infinix or their business model, but I do know that because they trade on the pink sheets, it which means that they are exempt from providing regulatory filings that legitimate public companies have to maintain. Investors don’t get quarterly financial reports, an accurate view of the number of shares outstanding, or any other important information that one needs to make informed decisions.
Why Netflix would allow their good corporate reputation to be sullied by these cheap carnival barkers is beyond me, but I find their continued support of the company to be truly disturbing. Considering, that after covering every single intimate detail about Netflix for nearly three years, that I can’t even get Netflix’s PR department to respond to a single email from me, I’m amazed that this site has been able to get not one, but two opportunities to muddy Netflix’s financial reputation. Had Netflix investors fallen for WallSt.net’s press release touting scheme last year, it would have cost them dearly and yet a year later, Steve Swasey is more then happy to publically discuss Netflix from a financial perspective on their site. Fool me once shame on me, fool me twice shame on Netflix.
Posted on November 21st, 2006 by Davis
Filed under: Disclosure - I own stock in co. mentioned, Netflix, Spam
[...] I raise this because of an interesting blog post I’ve just read by a San Francisco Bay Area investment advisor who writes under the pen name “Davis Freeberg.” [...]
How to Spot Suspect Experts and Avoid Bad Surprises…
Davis Freeberg wrote a fascinating article about the apparent authority Netflix conferred on what Freeberg called a “penny stock touter”. The are applications of Freeberg’s……
WallSt.net is owned by Financial Media Group, Inc. which is itself publicly traded under the ticker symbol OTCBB: FNGP
I’ve been using WallSt.net for a few years now, and although they do advertise for ‘penny stocks,’ they clearly disclose what they were paid. The press releases that they issue also include disclosure from the companies that they received payment from.
Being open about conflicts of interest doesn’t make their shenanigans morally justifiable. They receive payment from companies or investors for thinly traded stocks and their mission is to try and boost share prices. If there is a compelling story to be told, that’s find, but to attach those penny stocks to a legitimate company is slim shady. It’s a clear case of WallSt.Net trying to use their association with legitimate companies to forge a sense of trust with their readers. The disclosures are in the fine print and their track record for the companies that they’ve been paid to promote certainly raises a few eyebrows.
Yes there are companies mentioned/interviewed that are not penny stock scams. However, how good would a CEO be to get near this site?
I’m not sure that I understand your question EF? My issue isn’t with Netflix not granting me an interview, it’s with them allowing a penny stock promoter to soil the reputation that they’ve built. Whether or not it makes sense for a CEO to talk to me is a different issue, although I would argue that Reed Hastings benefited when he did take the time to talk with Hacking Netflix about his business. Certainly that was a better use of company resources then talking with WallSt.net and letting them tout their penny stocks.
I work in the public relations industry and used to handle a respectable publicly traded company. We were approached by WallSt.net to arrange an interview with the CEO. We investigated the outlet and, based on the parent company and affiliated media, found it to be credible. After we granted the interview and responded to preliminary questions, we received an email about improving the “distribution” of the interview by purchasing additional exposure…what we irritatingly deem “pay for play.” I have not seen the touting of penny stocks as a result, but perhaps we were lucky. Unfortunately, these types of “media” organizations have gotten very astute at how to play the game and take advantage of corporate comms. professionals. As a fellow PR practitioner who had an unpleasant experience with this outlet, I can offer that it seems an honest mistake on the part of Netflix PR. Why they would have granted a second interview is beyond me…but, it’s altogether possible that WallSt.net repurposed material from the first interview and claimed a “second” feature.