The latest fact
(or fiction) about
your stock is online

Internet message boards create
a community of shareholders, but
let the investor beware

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By Dave Segal
dsegal@starbulletin.com

There's nothing like a high-stakes merger to bring message board posters out from behind their computer screens.

Ever since this controversial deal was announced last year, Internet chat rooms have been abuzz about the ramifications of the alliance and what it would mean to investors and consumers.

But this isn't about Hewlett-Packard and Compaq.

Rather, the ill-fated marriage of Hawaiian and Aloha airlines has received so much chat-room traffic that the message board has more than twice as many visitors as Hawaii's 11 other publicly traded companies combined.

Interestingly, speculation already was brewing before the airline deal was called off that Greg Brenneman, the merger's architect, might not be around long enough to collect many frequent flier miles.

"I bought into HA (Hawaiian Airlines) because it was apparent that someone has invested a lot of time and money into laying the foundation for a large improvement in its performance," chat-room member "boxcarrs" said in a Yahoo posting just six days before Hawaiian's March 16 announcement that it was scrapping the deal. "Those same interests brought Brenneman into the picture for a reason. I do not claim to have any special knowledge about the industry, but I have seen this scenario many, many times with other companies and I can tell you that Brenneman gives the company a certain cache with a segment of the financial com- munity that is critical to its success. In my opinion, he could be jettisoned at any time and the company will do well."

With a couple of exceptions, the traffic on Hawaii message boards pale in comparison to the postings received by many mainland-based companies. One possible reason is that there are no Hawaii-based technology companies that can generate big swings in stock price. Another likely reason is that many Hawaii companies are thinly traded or have little following on the mainland.

Still, most of the publicly traded Hawaii companies do have some activity on their message board sites.

Next to Hawaiian Airlines' 989 postings this year through Thursday, Big Island biotech firm Cyanotech has the next most with 288. It should be noted, however, that supporters or bashers of rival Aquasearch, now in Chapter 11 bankruptcy, often appear on the same Cyanotech board. Aquasearch has no message board of its own.

Kauai shrimp producer Ceatech USA also has no chat room, while two other companies -- Barnwell Industries and Central Pacific Bank parent CPB -- have had no postings since the start of the year.

Of the other six publicly traded Hawaii companies, Hawaiian Electric Industries, ML Macadamia Orchards and Bank of Hawaii parent Pacific Century Financial get the most activity while Alexander & Baldwin, City Bank parent CB Bancshares and Maui Land and Pineapple get a few stragglers.

One caveat when it comes to message boards. Participants post under aliases, leaving their intentions open to speculation. Some may even have multiple identities. So let the investor beware.

Hawaiian Airlines' chat room has taken a turn with the scrapping of the merger.

What used to be a lively debate on the merits of the merger has now become Monday-morning quarterbacking about why it was called off and whether the stock price, which hit an intraday high of $4.60 on March 5 and fell as low as $2.35, is a bargain at its current $3.30.

"Hawaiian Air, controlled by AIP (Chairman John Adams), has been difficult for me to predict over the couple of years I have watched/owned it," said WishIwasinHawaii. "I believe, like you, that Adams was not about to release control of 'his' company and so worked to make the deal fall apart. I don't understand what got him involved in the first place. Like you, I'd like to have a better idea of what's going to happen next."

Keoni Wagner, spokesman for Hawaiian Airlines, said the company is not ready to announce those plans.

"As far as the future plans of the company, we won't be broadcasting that for the time being until we're finished meeting directly with employees on the subject," he said. "We've had a series of meetings this (past) week and will continue (this) week. It's one of those subjects that we'd like to share with employees before speaking publicly."

That leaves investors in a vacuum as far as whether the stock represents a "buy" at these levels.

"Just got in at 3.14," wrote cbakke2000. "Ran as fast as I could from some other POS (position). At least this board seems like there may be real investors out here. Any thoughts on this thing regaining the 4.00 mark?"

Wagner, who noted the company doesn't spend much time watching chat rooms, said Hawaiian is still very much interested in people's opinions.

"By and large, what you see in chat rooms is a lot of conjecture and perhaps more questions than answers or opinions," he said. "So while we do pay some attention, what matters most is the direct communication we have with our customers and shareholders."

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Hawaiian Electric Industries, which provides electric service to 95 percent of the state in addition to operating American Savings Bank, has attracted a legion of fans with its 5.7 percent annualized dividend yield.

"What a boring stock this is," said poster Larry95130. "All it does is crank out dividends quarter after quarter, decade after decade, century after century. Auwe!"

He's not alone with his praise, either.

"Good company, good earnings, good cash flow, very predictable," said wealth- letters_com. "That is what I like in this one for 2002."

Not everyone, though, has jumped on the HEI bandwagon. Analyst Joe Coyle of St. Louis-based brokerage Edward Jones is the only one of six analysts listed by Bloomberg who has a "sell" rating on the stock. He downgraded the shares from a "hold" just over a year ago.

Coyle said that although he believes the dividend is secure, he's been negative on the stock because of major charges the company has taken the past couple of years and what he perceives to be a limited growth outlook.

"They really had gotten out of some of their (core) businesses, causing them some losses and to liquidate (or sell) their (international) operations," Coyle said.

Coyle, though, said he is not prepared to upgrade his rating even though the stock has returned about 25 percent, counting dividends, since he issued the "sell" rating.

"We need to see more of a long-term return to more of their core businesses -- the bank and the utility," Coyle said. "In a recent conversation I had with management, it appears they're leaning toward getting back to the basics. But we need to see a track record of that for there to be a catalyst to buy the stock. There has to be something there to recommend it over another utility. Some reasons I don't like it as an investment remain the same. It's geographically (isolated) and it's difficult for the utility to expand the business. And when you look at Hawaii in general, it's pretty sensitive to tourism and the Pacific Rim economies."

Coyle said that while he doesn't particularly follow the message boards, they are "a good place to look to see what's going on."

Meanwhile, Robert F. Clarke, chairman, president and chief executive of Hawaiian Electric, said that he responds to requests from investors that write or phone the company but has not looked at the message boards for a couple months.

"I think the message boards are just a lot of chitchat," he said. "There have been some abuses of the message boards, especially in highly regulated tech stocks, but we're not that kind of stock."

As for the dividend, Clarke reiterated what he has said in the past. "We intend to keep it at the current level for the foreseeable future," he said. "I think a lot of investors are too yield-oriented in the current environment and the yield is pretty attractive."

A couple of posters also wondered whether the company might be considering its first stock split since a 2-for-1 in 1984. Clarke, however, said it wasn't in the offing.

"There are no plans to split the stock at this time," he said. "I think the stock price at 44 (Friday's close was $43.59) is reasonably affordable for most investors to buy at least 100 shares."

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The buzz on the Cyanotech message board is all about the marketing efforts for the company's microalgae-based antioxidant, BioAstin, and whether the company's languishing stock price will make a decisive move -- one way or the other -- away from the $1 level.

The Kona-based company, which blamed high rainfall levels for its losses tripling in its December quarter, has since ramped up production while preparing to test-market an infomercial.

"Just hoping that CYAN does not postpone the initiation of the test of the infomercials," wrote lostnfoundation. "Generally target dates are not reached in most of the stocks that I followed."

A veteran Cyanotech shareholder tells his peers that he has done his due diligence.

"I have owned the stock since BioAstin was just a gleam in their eyes," said maaaven. "I saw the lakegrown Spirulina (a nutrient-rich dietary supplement) come in and watched (the) thing fall apart. I stuck with it and have doubled and redoubled as prices dipped."

Cyanotech Chief Financial Officer Ronald P. Scott, who said he sometimes checks the postings, said "occasionally there's some good thoughts in there but often times it's not something you want to read on a regular basis."

"When the stock is moving up, I'm the smartest guy in the world," Scott said. "And when it's moving the other way, I'm the biggest idiot. Most of the messages on the Yahoo chat board are always from the same cast of characters. There's always some people who have too much time on their hands."

In fact, Scott said Cyanotech has a policy that prohibits employees, as well as officers, from posting on chat boards.

Still, Scott admitted that sometimes "it's real tempting to get on there and respond to some of these comments and declare that the writer is not well-informed."

Scott said Cyanotech will not be profitable for the March quarter because of preparation for the infomercial but said the company will be cash-flow positive for the quarter. He said Cyanotech will run its infomercial April 12 on cable channels in San Diego, Phoenix, Cincinnati and Atlanta.

"We just want to get kind of a broad demographic coverage to see how well it does," Scott said. "We won't roll it out nationally for another three weeks after that."

Still, not all are convinced about the merits of Cyanotech's stock, which closed Friday at $1.15 and has been hard-pressed to distance itself from the $1 level.

"Run for the hills folks," warned lostnfoundation in a March 15 posting. "This stock is acting like someone knows something not too good with this stock. I see 50 cents soon or less. Have a depressing weekend, I will."

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Michael E. O'Neill isn't reluctant to be recognized in public. The chairman and chief executive of Bank of Hawaii parent Pacific Century Financial Corp. has his face all over the bank's TV commercials as well as placards for his e-mail and letter-writing marketing campaign.

Perhaps, then, it's no wonder that the Yahoo message site doesn't get that much traffic.

"Maybe the reason there's so little activity on ours is because we had the 'Tell Mike' campaign," O'Neill said. "So anyone who wants to send me a nasty message (mike@boh.com) can do it directly rather than post it on Yahoo."

Still, O'Neill said he does check it about once a month. Recent postings have included questions about the replacement for outgoing President Richard Dahl -- who leaves at the end of this month -- and O'Neill's cost-cutting decision to give up his $1 million-plus salary, cut top executives' pay 10 percent and give out more stock options to make employee compensation based on performance.

"I'd call that a true performance-based compensation plan," wrote kidkolohe. "Good for nonmanagement employees' morale, too. They're the ones who usually bear the brunt of cost-cutting measures. Of course, Mr. O'Neill probably can afford the drastic pay cut more than the average BOH employee. I wonder if some of the other "leaders" (aka highly paid executives) in this community will take note and follow suit."

As for Dahl, O'Neill said he wanted to emphasize that Dahl wasn't being forced out.

"We're not going to be replacing him," O'Neill said. "What happened is this bank used to have a very large footprint in a very large network and we've greatly simplified business by focusing principally on Hawaii. As a consequence, a guy of Richard's caliber doesn't have enough of a job here to really challenge him although I tried very hard to keep him. I think he concluded there just wasn't simply enough meat to what I was offering."

Since the bank's bylaws require that there be a president, O'Neill said he will be assuming that role as well as his current responsibilities.

"I've got so many titles now that I don't think I can get another one on my business card," he said.