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SEC Suspends Trading of Shopping.com Stock

March 25, 1998|P.J. HUFFSTUTTER | TIMES STAFF WRITER

Citing possible market manipulation, the Securities and Exchange Commission suspended trading Tuesday in the shares of online retail service Shopping.com Inc.

Trading will be suspended for about two weeks because of a "lack of current and accurate information" about the company, the SEC said.

Critics have questioned the prospects of the Corona del Mar-based company and whether its market maker, Waldron & Co. of Irvine, may have propped up the stock.

Waldron insists that the complaints are unfounded and that the SEC action is unjustly fueled by bitter "short sellers" who bet the stock price would collapse--and lost money when it didn't.

"The short sellers don't know what they're talking about," said Cery Perle, the firm's president.

Short sellers target stocks they believe are overvalued, borrowing the shares and selling them, hoping to replace them later at lower prices.

SEC officials declined to comment beyond a news release. But sources at NASD Regulation Inc., the enforcement arm of the National Assn. of Securities Dealers, said the agency is looking into the matter.

Shopping.com, billed as the "Wal-Mart of the Web," acts as a liaison between online shoppers and merchants. The company raised $11.7 million in its initial public offering last November, selling 1.3 million shares at $9 each. The stock rocketed afterward, reaching a peak of $32.13 on March 12.

Like other online commerce ventures, Shopping.com is losing money. The company expects to report a $4.7-million loss on sales of $802,000 for its latest fiscal year, which ended Jan. 31.

Analysts at Chatfield Dean & Co. have questioned the company's prospects. They point out that Shopping.com keeps just 5% of the sales price of all goods and services purchased through its Web site.

"The company's stock could slide down to $5 a share," said Kelli Donges, an analyst with Chatfield Dean in Englewood, Colo. "They're losing money now, it looks like they will lose money [$5 million] this year, and they don't have a lot of cash left" from their IPO.

The stock was last quoted at $22.25 on Monday on Nasdaq's electronic bulletin board.

NASD officials said they had been told March 16 that Waldron was no longer able to clear stock transactions through its clearing broker, Wedbush Morgan Securities in Los Angeles.

But three days later, federal officials said Wedbush had changed its mind, and reinstated Waldron's ability to use the firm's trading symbol and to clear deals.

Short sellers have accused Waldron and Wedbush of trying to squeeze them out of their short bets by forcing "buy-ins" of the stock.

Wedbush officials declined to comment Tuesday.

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