John Kimelman outlines a problem faced by Seeking Alpah and other websites devoted to stocks but written largely by non-professionals, with limited experience, resources and writing ability, and often by anonymous writers. He suggests the website should limit the use of anonymity as one step in improving accountability and quality of the work. I would add the readers need to be particularly skeptical of articles on penny stocks and microcaps that are easily manipulated. ~ Ilene
Seeking Alpha Needs to Take Stock of its Policies
By John Kimelman, Online Barrons
The popular investor Website has become an easy mark for stock manipulators. Why it should be fixed.
The editors of Seeking Alpha have much to be proud of. They also need to take action to address some serious shortcomings.
Created in 2004 by David Jackson, an ex-Morgan Stanley technology analyst, the investor Website is widely read by individual and professional investors. At last count, according to the site, Seeking Alpha attracts about nine million unique visitors a month, an impressive achievement for a financial Website.
Seeking Alpha's content is written not by a staff of full-time salaried journalists but by literally thousands of self-directed investors and other students of the market, many of whom choose to use pseudonyms rather than their real names on the top of their articles. Each day, there are close to 250 fresh articles taking both positive and negative views of stocks and other investments.
Advocates of this high-volume approach to populating an investment Website argue that the "wisdom of the crowds" helps provide greater efficiency to the valuing of stock prices than can be provided by traditional sites.
Indeed this approach got a shot in the arm earlier this week. The Wall Street Journal wrote about an academic study of Seeking Alpha's content over several years. Written by professors at Georgia Tech, Purdue, and City University of Hong Kong, the study found that the site predicted stock returns, as well as earnings surprises, above and beyond what was evident from Wall Street analyst reports and financial news articles.
But Seeking Alpha has also received some troubling press in recent weeks, exposing problems inherent in the site's policy of allowing anonymous contributors. The problems, I contend, also stem from less than stringent editorial standards that need to be tightened up so that Seeking Alpha can do a better job resisting stock manipulators who see the site as an easy mark.
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To its credit, Seeking Alpha was willing to eat plenty of humble pie by running a lengthy and highly detailed article by Richard Pearson, a private investor, who chronicled how he was allegedly approached by an official representing an investment-relations firm employed by two small biotech companies seeking some good press. "I was asked to write paid promotional articles on Galena Biopharma and CytRx Corp. (CYTR), without disclosing payment," wrote Pearson, who then decided to short shares of CytRX. (See Read This, Spike That, "An Insider's Tale of a Stock Promotion Plan," March 15.)
Full article Seeking Alpha Needs to Take Stock of its Policies – Barrons.com.
