Online Stock Trading - John Mackey
WHOLE FOODS CEO JOHN MACKEY aka RAHODEB INSISTS HIS POSTS WERE JUST A BIT OF FUN ! THE SEC TO INVESTIGATE ALL THE SAME
For years Whole Foods Market Inc.’s CEO John Mackey used the alias rahodeb when posting messages on a Yahoo! financial bulletin board. He liked to tell the world how good his own company Whole Foods Markets Inc. was, while talking down rival company Wild Oats Markets Inc., which, rather surprisingly, he has since agreed to purchase.Personally, I am amazed and disgusted that the CEO of a listed company should engage in such practices, but I am also incredulous at Mr. Mackey’s apparent dismissal of his underhand actions as a bit of 'fun'.
According to court documents filed by the U.S. Federal Trade Commission and postings on Yahoo!, Mackey used the alias "rahodeb," an anagram of his wife’s name.
For more than seven years he posted entries talking up his own company and at times denigrating rival Wild Oats. The story appeared first on the Wall Street Journal’s website yesterday 12 July.
In a new development, as reported by Kara Scannell in the Wall Street Journal WSJ ,the SEC has launched an informal inquiry into the online postings of Whole Foods Market Inc.'s CEO John Mackey, according to people familiar with the matter. Kara Scannel says "the SEC will likely look at whether the CEO selectively disclosed material corporate information -- that could violate a securities law passed in 2000 known as Regulation Fair Disclosure."
Talking about Wild Oats in his posts Mr. Mackey said "they are floundering … but the problem is they lack time and capital. "
Some of the bulletin board members were apparently not taken in by his alias, but when he was accused of being John Mackey, rahodeb replied on 10th June 2003: “Another person who thinks my name is John (Mackey)! Well if you really believe I’m John Mackey you should probably pay more attention to what I say on this board. I would be the ultimate Whole Foods Insider!”
Note that he didn’t deny that he was John Mackey.
In one of his posts on 28th March 2006 when talking about Wild Oats he claimed: "The writing is on the wall. The end game is now underway for (Wild Oats) .... Whole Foods is systematically destroying their viability as a business -- market by market, city by city".
This post was cited by the FTC in a lawsuit initiated to block the planned $565 million acquisition of Wild Oats by Whole Foods' on the grounds that the deal would be bad for competition and also bad for consumers, as it would lead to increased prices.
The next day, 29th March 2006 he wrote "Bankruptcy remains a distinct possibility (for Wild Oats) IMO if the business isn't sold within the next few years." (Sounds illegal to me – but hey I'm just an ordinary joe not a Master of the Universe like Conrad Black - Ed.)
Whole Foods have confirmed that the "rahodeb" postings were made by Mackey between 1999 and 2006, but the line they have come up with is that he used an alias in order "to avoid having his comments associated with the company and to avoid others placing too much emphasis on his remarks ….. " and also because "the rahodeb postings are the personal postings of Mr. Mackey and not those of the company". Haha, do they really think that will wash with anyone except the most blinkered Mackey groupie?
On the Whole Foods' website, Mackey claimed he "posted on Yahoo! under a pseudonym because I had fun doing it. Many people post on bulletin boards using pseudonyms." Lol – well we all like a bit of fun ! Even if it means other people lose money in the process, well that's even more fun I guess !
"The views articulated by rahodeb sometimes represent what I actually believed and sometimes they didn't. Sometimes I simply played 'devil's advocate' for the sheer fun of arguing." And sometimes I go stick up a bank just to see the expressions on their faces!
More "fun", everything seems to be fun to Mr. Mackey, is he aware that to some people losing money is not fun. Some of the fun he had is evident in a posting dated 25th January 2005, when he wondered why anyone would buy shares in Wild Oats at the price at which they were trading at the time ($8) "Would Whole Foods buy (Wild Oats)? Almost surely not at current prices. What would they gain? (Their) locations are too small."
In February, Whole Foods announced plans to acquire Wild Oats. Both the companies say the merger is a necessary step due to the highly competitive nature of the grocery business.
But Mackey also claimed in other postings that there wasn’t much serious competition to Whole Foods.
On 28th September 2005 he said : "If you are waiting for Trader Joe's or Wegmans to slow down the Whole Foods express train you're going to be waiting the rest of your life. »
And on 3rd October: "You say that competition is increasing against Whole Foods, but continue to ignore the fact that your so-called competition isn't hurting them."
The FTC released the document late Tuesday.
On his blog, Mackey, under his own name this time, has accused the FTC of "distorting his private statements in order to portray him as excessively aggressive and bent on eliminating healthy competition."
According to Harvey Pitt, a former Securities and Exchange Commission chairman, speaking to The Wall Street Journal an executive using an alias to talk up his company and stock "isn't per se unlawful, but it's dicey,"
Commenting on the Mackey posts he said, "It's clear that he is trying to influence people's views and the stock price, and if anything is inaccurate or selectively disclosed he would indeed be violating the law. …. At a minimum, it's bizarre and ill-advised, even if it isn't illegal".
Mackey posted his last remarks in August 2006, after losing a bet to another BB poster concerning Whole Food’s stock performance. Well, at least he’s a man of his word, so that’s OK!
He said: “Surgeon General and Boston Cowboy — you were both right about my true identity all along. …. Congratulations on your cleverness.” No hard feelings there then, but is he not interested to know if anyone lost any money as a result of his misleading posts?
Why did Mackey want to buy Wild Oats anyway? A court document dated 6th June states that Mr. Mackey’s justification for paying a "significant premium" for Wild Oats was that the company would thus “avoid nasty price wars in Portland (both Oregon and Maine), Boulder, Nashville and several other cities which will harm our gross margins and profitability.” i.e. prices charged to customers would be higher.
To my mind the implications and questions raised by this affair are far-reaching: -
- How many other CEOs or company executives post on financial bulletin boards using aliases? And should they be allowed to do so? Surely "rules of disclosure" would require that they post under their own name and declare their interest?
- Is it legal to make false claims to gain financial advantage, even if those claims are expressed as opinions?
- In this specific case was Wild Oats aware of what was going on? Did they have one of their own men/women on the inside also posting counter-arguments under an alias? (Wild Oats have so far refused to comment on the affair and are still in favor of the merger).
- What about the shareholders/investors in all this? It may have all just been a bit of harmless 'fun' to Mr. Mackey, but some people may have lost money as a result of his negative remarks about Wild Oats and his talking up his own stock? Would they have a claim for compensation? Could they take a lawsuit out against him?
Personally I think Mr. Mackey’s actions were disgraceful, whether they were illegal or not is a matter for the lawyers. To think that a CEO of a company could spend his time trying to deceive people does not say much for his integrity or his regard for the shareholders of either company. To then dismiss it all as "fun" I find extremely disturbing. It is not comparable to shareholders of a company trying to talk their stock up, we all know this goes on all the time. There are also the "pump and dump" merchants whose sole purpose is to create a bubble in a stock and to sell at the top, thus effectively stealing money from anyone foolish enough to believe their lies, we all know this goes on too. But for a CEO of a listed company to try and influence the share price of a rival company is a whole different matter and I find it staggering that Mr. Mackey can dismiss it as a bit of fun. This to my mind shows that he was either unaware of the potential consequences of his actions or he simply didn’t care. This is all the more worrying as on his own blog he frequently mentions the need for openness and transparency in business. What is open or transparent about posting anonymously under an alias about a rival company?
Shareholders may have been exposed to considerable financial losses, a fact which does not appear to bother Mr. Mackey. Perhaps there could be more "fun" on the way if shareholders decide to sue ?
Update : Over the last two days numerous commentators and journalists have spoken about Mr. Mackey's actions. Their overwhelming reaction has been one of incredulity a) that a CEO could be so foolish as to do what Mr. Mackey did and b) that he seems to consider it all a bit of fun and seems incapable of grasping the enormity of his actions.
If it costs Whole Foods the merger with Wild Oats perhaps he will change his tune, but as far as I can see he has shown no inclination to do this as yet, he seems to think it is all a government conspiracy against him and he sees himself as a victim. Not at all Mr. Mackey it's all just a bit of fun!
john mackey rahodeb wholefoods whole foods bulletin boards ftc
4 comments:
If Mackey was posting under his own name, his comments would have serious credibility in the marketplace. Rahodeb, however,is just another person commenting with no more or no less credibility than anybody else. No market player should ever make investment decisions based on anonymous comments on the internet. As Rahodeb, there is no harm, therefore, no foul.
I don't believe that for a minute. John Mackey in his blog says he wants to improve 'transparency' in business, how does posting anonymous comments improve transparency? Plus he was a CEO of a company deliberately (and anonymously) criticizing another company that he wanted to acquire. As CEO of a competitor he should have declared his interest so that people would understand that his remarks about his rival were not objective, but possibly had ulterior motives. Why don't all CEOs have a double life where they post anonymous and negative comments about their competitors? Do you go around the Internet anonymously criticizing other people's blogs 'just for fun' (as he likes to describe it) and not letting people know who you are or what your motives are ? I suspect not. His behaviour was very strange and what is even stranger is that he doesn't appear willing to acknowledge the fact. In addition, this may have cost his company a multi-million dollar merger !
OK, I agree that Mackey's behavior was sleazy and tawdry and no, I do not criticize other's blogs for fun. His behavior was clearly strange. My only point was that the market impact of his Rahodeb rantings should be minimal as would the rantings of any other unidentified or unknown writer. The impact could possibly occur if he presented facts that were not in the public arena. As far as I understand at this point in time, he was only presenting his own opinions.
Yes, I guess that may be true, you would have to look at the charts to see if there was any impact. But I still think it was wrong to do it, especially as he is now trying to buy the company. I never had any shares in Wild Oats but if I had had I would be going through the posts and the charts with a microscope to see if it could be proved that his comments cost me money. I still think he might find the SEC inquiry takes a very dim of view of what he did. It just doesn't seem very professional.
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