Blogging and stock price manipulation

Ryan Chittum of Columbia Journalism Review writes about how The Motley Fool faced attempts to manipulate some of its writers into posting items about a questionable penny stock.

Chittum writes, “Richards reports the site ‘has banned four bloggers because they submitted suspiciously glowing posts on Goff.’ He also notes that SeekingAlpha, a competitor stock-blogging site, published four positive Goff posts during the pump.

“And hats off to the blogger, whom Motley Fool doesn’t name, for having the integrity to turn down the bribe. Because others didn’t think anything of it. Here’s one of the banned Motley Fool bloggers:

When we questioned the nature of his Goff post, he said it wasn’t a big deal: ‘I am on a regular basis offered compensation to write about multiple firms.’

“The obvious question here is: How prevalent is corrupt user-generated content like this on the financial blogs? And since the answer to that question is unknowable, how can you trust any of it? Richards reports that Motley Fool has ‘strict rules against publishing stories on micro-cap companies with limited liquidity and/or low share prices to avoid manipulation of stock price, intentional or not,’ but it clearly didn’t work here, at least until it was too late.

“But give Motley Fool a lot of credit here for simply doing the story, much less diving into it. Richards doesn’t shy away from reporting how his site’s own blogging platform got abused in the matter. It would have been much easier for Motley Fool to let this story slide.”

Read more here.