TheStreet.com - 12/9/99 4:19 PM ET
TRUTH SERUM: A TOUT WITH CLOUT
By Gregg Wirth Staff Reporter
Richard Eakle is a busy man.
He's the president of Eakle Associates, a Fair Haven, N.J., hedge fund advisory firm that counts George Soros among its clients, and he runs a $50 million portfolio he says is up 206% this year. A former technical analyst for Morgan Stanley Dean Witter (MWD:NYSE - news), his views and investment ideas have appeared in The Wall Street Journal and Barron's, and on CNBC.
And after appearing in a Dan Dorfman article on JagNotes Monday, though, that impressive curriculum vitae may appear a bit less sparkling.
In an interview published Monday, Eakle addressed the overall market's prospects and cited a handful of stocks he says will about double within a year.
Dorfman ended the piece by letting Eakle mention something "in a more speculative vain" [sic]: MarketCentral.net (MKTS:OTC BB - news), a New York-based financial news and tools portal that's trading on the over-the-counter bulletin board.
In the interview, Eakle calls MarketCentral a "mini-Yahoo! (YHOO:Nasdaq - news)" and "an undiscovered Nasdaq gem." In addition, Eakle says he sees the stock rising tenfold to 25 to 30 per share over the next year.
While JagNotes can take credit for calling this play speculative (if not for misspelling "vein"), what wasn't noted is that Eakle is a paid consultant to MarketCentral. A Sept. 23 press release from the company labels Eakle a "heavyweight trader and analyst."
Almost as soon as the interview was posted on JagNotes at 1 p.m. EST, the stock climbed about 64% to 4 1/2 from the previous close, before ending the day at 4 7/16. The 136,000 shares traded amounted to about seven times the average daily volume. By Wednesday's close MarketCentral shares were worth 3 11/16.
Midday Moving
Richard Eakle's mere mention of MarketCentral almost doubled the stock's price in a matter of minutes on Monday
Eakle says he told Dorfman of his relationship with the company, and thinks Dorfman may have disclosed it in the past. Attempts to find such disclosure on the JagNotes site were unsuccessful. Dorfman didn't return repeated phone calls for comment.
It's a sign of the times that Eakle, who could be considered a representative of old-school, predaytrading Wall Street, says he sees little wrong with "taking advantage of the news media" to raise the profile of a stock he sees as a good buy. It hasn't always been that way, especially for someone of Eakle's stature.
He adds that he also owns the other four stocks he mentioned in the article, including Abgenix (ABGX:Nasdaq - news) and Accrue Software (ACRU:Nasdaq - news). Eakle doesn't have any consulting agreements with those companies.
Abgenix, however, has a $1.2 billion market cap and trades in the 80s, making it harder to push around than a bulletin board stock. (Abgenix did close at 84, up 5 1/2, on Monday, but retreated to 79 7/8 a day later.)
"Besides, the only real difference between a bulletin board stock and a Nasdaq stock is revenue," says Eakle. Yep, and the fact that you're getting paid to talk about it.
Somewhere along the road of this long bull market, such things have stopped mattering as pros and rubes alike chase performance like so many pooches after a great big fire truck. After all, is there any real difference in a 300% run-up in a penny stock and the same escalation in a daytrader favorite such as Red Hat (RHAT:Nasdaq - news)?
Both surges hope to capitalize on bull-market babies searching for The Next Big Thing in the new paradigm, or at least the next big trade. And, hey, a stock trading at 2 3/4 is an equalizing opportunity for those who can't afford the 270 clams a Red Hat share costs.
And Eakle seems undeterred by such factors as MarketCentral's penny stock origins and almost laughable financial condition -- its losses are 35 times revenue, and all the losses are listed as "general and administrative." MarketCentral has been doing business for less than a year, after completing one of those penny stocks specialties -- a reverse merger into a public shell -- in February with an outfit then called All American Consultant Aircraft.
Aircraft. Internet. Heck, ostrich farms. It's all the same.
MarketCentral lists a phone number in Vancouver, B.C., as its main contact. It patches you into Meridian Mercantile, an investment bank that specializes in bulletin board stocks.
Earlier this year, MarketCentral was threatened with being delisted from the bulletin boards, along with several thousand other penny stocks, as part of a Securities and Exchange Commission effort to get those companies to start fully reporting their financial statements.
On Sept. 22, the company issued a press release saying it completed the forms to become fully reporting. The most recent numbers available on the company were posted Nov. 15, and they reveal that for the six months ended June 30, MarketCentral showed revenue of $5,013 and net losses of $177,181. With about 4 million shares outstanding, that meant a per-share loss of 4 cents.
Eakle's role within MarketCentral goes beyond just giving glowing interviews, says Roy Spectorman, MarketCentral's president. Eakle's compensation agreement, which Spectorman wouldn't disclose, includes creating an online trading advisory service and helping the company raise $15 million in new financing.
"Plus, it adds to our credibility to have his name on the site," says Spectorman. "Getting Eakle isn't easy."
And for the many who bought MarketCentral at 4 1/2 Monday afternoon, getting "Eakled" wasn't cheap, either.