Categories: OLD Media Moves

Pearlstein’s takedown of TheStreet’s Feuerstein falls way short

Columbia Journalism Review‘s Ryan Chittum analyzes Washington Post columnist Steven Pearlstein‘s attack on TheStreet.com’s Adam Feuerstein for using short sellers as sources and concludes that it wasn’t warranted.

Chittum writes, “There’s no doubt that Feuerstein is an aggressive, sometimes brash, reporter, with a deep knowledge of the biotech industry picked up over nearly 14 years of covering it. Generex Biotechnology Corporation brought a $250 million libel suit against Feuerstein and TheStreet in 2010 for writing that its actions were ‘aimed at misleading investors’ and ‘a ruse to perpetuate a 15-year-long stock promotion scheme.’ Generex had to drop its suit a year and a half later. Its shares now trade for 2 cents apiece, down 96 percent from when Feuerstein called out the firm.

“But the charge that he’s working with shorts to undermine NWBO falls apart upon inspection.

“It’s been clear for years that Pearlstein doesn’t like short sellers. He called for banning the shorting of Wall Street stocks during the financial crisis, and has criticized ‘the unfairness of short selling.’

“In that, he’s hardly alone. People buy stocks because they want them to go up, and financial commentary, reporting, and analysis—both in the press and on Wall Street — tilt heavily toward encouraging investors to buy. In February, for instance, just 25 stocks in the S&P 500 were rated ‘sell’ by analysts.

“But markets work best when companies are scrutinized from all sides, allowing investors to weigh all the information. Not every company is worth buying, much less holding, and short sellers look for companies that are overvalued and/or have questionable activities that can signal deeper problems, like mismanagement or outright fraud. They pay (often very high rates) to borrow shares and then they sell them, hoping the shares fall in price by the time they have to replace them. It’s an extremely risky business and requires intensive research. That makes them potentially valuable sources for reporters. It’s also what helps make them a magnet for conspiracy theories, something we know all about here at The Audit, which used to be funded in part by a short seller, Kingsford Capital.”