We have covered Mackey’s gaff a couple times already, but this situation is going to go far beyond mackey himself. After Whole Foods (NASDAQ:WFMI) CEO John Mackey was busted for using the Yahoo! Message Boards as a part time job from 1999 to 2006, there have been many such questions about the how this will affect message boards in general. This is going to affect POLICY rather than the mechanism, and it will probably affect Whole Foods (NASDAQ:WFMI) and its leader John Mackey personally. It would be easy to see Wild Oats (NASDAQ:OATS) file all sorts of lawsuits against Whole Foods, and it is hard to imagine that there is not a strong case here.
FUTURE POLICY CHANGES
The truth is that it probably won’t affectmessage boards at all as far as their availability. In today’s world,message boards are actually extended to chat rooms, blogs, podcasts,v-logs, and more. What you can probably bet some hard money is thatthe SEC had a meeting today or scheduled them for tomorrow with policyadvisors about officers of public companies making the practice of’posting to message boards and chat rooms under an undisclosed alias’a new absolute no-no for corporate officers. Many companies alreadyprohibit their employees from blogging and posting about their company,but this took the sleaze factor to a new high.
Mackey actuallycriticized Wild Oats (NASDAQ:OATS) and even responded to ‘negativeposts’ on the Yahoo! message boards. But this is not the mechanism ofthe message boards. This is a mechanism of having an unchecked CEOdoing whatever he wants and doing it undisclosed on an alias basis. Ifyou are an SEC registered representative the SEC asks clearly if youoperate under any alias when you apply for registration, and thatshould be no different for corporate officers. This tests ‘freedom ofspeech’ in an absolute sense, but this also puts REG FD to the test aswell. It is illegal to yell "Fire!" in a crowded place to see if astampede occurs, and it is now illegal for a CEO or officer to disclosenon-public information selectively. If you look at just these numbersbelow you will see how this ‘mechanism’ is going to be impossible toclose off completely. Search Term (followed by ‘number of searchresults’ on which search engine):
"Stock Message Board": 30.3 million on Yahoo!, 17.8 million on Google, 1.135 million on MSN.
"Stock Chat Room": 2.92 million on Yahoo!, 3.29 million on Google, and 2,228 on MSN.
"Investor Blogs": 20.2 million on Yahoo!, 23.6 million on Google, and 818,850 on MSN.
"Investing" in GROUPS: 8,993 on Yahoo! Groups and 341 on Google Groups.
HOW WILL THIS AFFECT WHOLE FOODS
Forstarters, Mackey needs to spend less time blogging and he sure as hellbetter not have any other alias that hasn’t been brought to thesurface. The Yahoo! message board posts under the name ‘rahodeb’ didend in August 2006, but the number of these posts came to a total of1,394. Over a 7-year period that averages almost 200 posts per year,and more than one every other day. These weren’t just "Yeah, we’regreat" stock touts or "Wild Oats is just the poor version of us"either, because many of these posts go on and on. If you look at hisblog posts now they are so long that you would wonder when this guy wasrunning the company.
Some critics of Mackey think he shouldstep aside, at least temporarily. Personally, I have not gotten backenough REG FD data to determine if he should be forced out, resign,take a leave pending the matter, or stay and fight. He may stay andfight since he’s virtually unchecked and he is the founder and headhoncho. Yes he is the founder and that does indeed count forsomething. He is also responsible for revolutionizing the foodconsciousness in America. Butthat doesn’t help when your stock is super-close to 52-week lows anddown close to 50% from the highs just 18-months ago. He also doesn’thold enough stock now to ride out every last bit of criticism.Personally, I am not yet ready to send him completely out entirely.But co-presidents Gallo and Robb better take more face time until thedust settles from this.
Thismay get worse tomorrow and over the weekend in the actual commentsbecause of the fact that were 1,394 posts and more time has beenavailable to take these in context. You can expect that Whole Foodsand other companies will be getting their policies together, and basedupon some of his posts I have read that he posted against Wild Oats I would expect Wild Oats to file all sorts of suits against the company for potentially aiding to its weakness and forcing them into a position they had to merge for relevance. Mackey’s own words will make for some pretty damning evidence that he was full of malicious intent, and they may hurt him personally more than they hurt Whole Foods as a company. That’s my take.
Jon C. Ogg
July 12, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
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