4 not entirely true things about Seeking Alpha

The U.S. Securities and Exchange Commission brought a ton of law cases recently against three penny-stock biotech firms and many stock advertising firms and their hired writers for publishing hundreds of deceptive stock-touting articles between 2011 and 2014. This resulted in sites like Phil’s Stock World covering these companies as part of their regular coverage. The articles appeared on several investment information websites, most prominently on Seeking Alpha, (where Philip Davis is also an author) the favorite crowd-sourcing investment platform.

The SEC investigation discovered multiple “pump and dump” schemes which “left investors with the belief they had been reading independent, unbiased investigations on investing sites while authors were being covertly paid for touting company stocks.”

For the biotech CEOs ordering up the bogus stories, “…stock advertising, not drug development, was priority No. 1,” based on a post at TheStreet.com.

For many investor relations professionals, news of the SEC investigation probably confirmed their cynical view of Seeking Alpha.

But…if you’re among the skeptics, here are a few items you may have supposed about Seeking Alpha and the imitation news case that are probably incorrect.

1. It took a SEC investigation to make this light.
Not really. It was probably a combination of Seeking Alpha’s own disclosure and investigative work by a TheStreet.com reporter along with a Seeking Alpha contributor that resisted the SEC investigation.

The first sign of a problem arrived in January 2013, when editors pulled five posts after discovering that a writer had employed three unique pseudonyms. When it became evident by March 2014 that this was more than a few bad apples, the site took additional steps to obstruct paid inventory promoters and has since applauded the SEC’s actions.

2. It’s awful for Seeking Alpha.
Probably not.

Additionally, the SEC’s enforcement actions seems likely to function as an added deterrent to potential miscreants.

3. It’s just the tip of an iceberg of questionable content.
Or, as Financial Times’ Alphaville place it, “Can we go ahead and put ‘securities analysis’ among the list of things individuals do not actually want to do without some guarantee of cover?”

It turns out there are a lot of reasons why Seeking Alpha’s authors do safety analysis for minimal or small compensation, Moriarty explained.

As an overview of the bios of legitimate contributors shows, many are busy investors or money supervisors writing to convince other people to buy or sell a stock or to market their enterprise. Some are analysts at “working retirement.”

The site recently introduced a subscription service at which top analysts can make significant income. Nine authors have surpassed $100,000 in annual recurring earnings, based on an article by Seeking Alpha CEO.

4. It shows that bigger businesses should have nothing to do with Seeking Alpha.
Wrong. Seeking Alpha probably represents the most significant agglomeration of engaged and active individual investors on the internet. The huge majority is centered on the mid-cap into the mega-cap assortment of stocks, and user engagement is high.

None of the fake articles found from the SEC investigation involved larger businesses. These shares generally have more robust analysis and comment.

Any firm interested in bringing retail investors should give the independent research supplier some consideration as a cheap approach to get in touch with this hard-to-reach pool of investable funds.