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NRM wants SEC to check Web rumors

Friday, March 05, 1999

By Teresa F. Lindeman, Post-Gazette Staff Writer

National Record Mart Inc. has asked the Securities and Exchange Commission to investigate a possible correlation between messages posted on Internet sites and attempts to manipulate the company's stock price.

President and CEO William A. Teitelbaum declined to say whether the music retailer's stock was materially affected by comments made online.

The Green Tree company's stock was trading at around $13 last November. It has since fallen to the $4 range.

The most obvious reason for the drop is a tough third quarter that saw net income fall as National Record Mart worked to launch a new Web site, absorbed the cost of acquiring new stores, and paid a penalty on debt. Without strong profits in the holiday season, the company is likely to report a loss for the year.

National Record Mart officials began to believe there might be something else affecting the stock price when they received a number of telephone calls from investors, said Teitelbaum. The callers had questions about Internet messages detailing alleged problems at the company.

"From our perspective, there was no foundation in the postings at all," said Teitelbaum, who did not identify the suspicious messages. He said National Record Mart's complaint simply asks the SEC to look into the issue, without naming suspects.

Certainly, participants in a Yahoo! message board yesterday seemed to think they knew the guilty party, posting jubilant notes accusing a frequent contributor who identifies himself as "Roshpina." "This person has been spreading rumors and filling this board for a long time with deceit, lies and rumors," said a contributor using the code name "Stkpik."

The use of such creative identifiers is one reason there's so much confusion about the information posted on Web discussion sites, said John Nester, a spokesman for the SEC's Office of Investor Education and Assistance. It can be hard to tell what the contributor's bias may be.

Nester said the SEC can't discuss individual complaints, but the agency wants to raise awareness of online scams that may include pumping up a stock with misinformation, then selling out before the price falls. In October, the agency launched a nationwide enforcement sweep to combat Internet fraud.

Analyst Roger W. Porter, with Branch, Cabell, was more interested in National Record Mart's announcement yesterday that February sales in stores open at least a year rose 3.3 percent. Compared with other music retailers, he said that was a strong showing.

Next, Porter said, management needs to get a better handle on expenses so it won't repeat the problems of the third quarter. "We're optimistic that they can."

He doesn't plan to check the online chat boards for the latest developments. "It's just a waste of time."

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