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Hoax hurts Web news credibility, not popularity

NEW YORK: While the recent posting of a hoax news release on a corporate Web site exposed yet another frailty of the Internet, investors are likely to continue to use the Internet as a source for news and advice, experts say.

The recent sabotage of the corporate Web site of biotechnology company Aastrom Biosciences Inc., which was allegedly manipulated to display a false notice of a merger between the company and its rival Geron Corp., led to a rally in share prices of both companies.

The attack, coming on the heels of the temporary shutdown of major Web sites last week as a result of hacker assaults, again raises issues about the Web's integrity and security.

Many financial analysts and pundits say the most recent attack should not scare people away from using the Internet as an investment tool, but instead may change the way people use the Web for news.

"If you're basing investment decision on one press release or one piece of information, you're not investing in the right way," said Jay Perlman, assistant general counsel for The Motley Fool, a Web site that provides news, message boards and chat rooms aimed at individual investors.

"People need to make informed investing decisions by doing their homework," said Perlman, who was previously a deputy chief of the U.S. Securities & Exchange Commission's Internet enforcement division. "In that respect, the Internet is actually helpful. It gives people easier access to official financial filings and a variety of research to make better investment decisions. The Internet can actually be used to prevent fraud of this nature."

The recent prank brought to mind a former employee of telecommunication equipment company PairGain Technologies Inc., who posted a fake corporate takeover story on the Internet with links to a false Bloomberg news page. The hoax similarly sent shares of the company soaring before the hoax was revealed.

"(The Aastrom hoax) is just one more example of something we should have learned a long time ago. You must double check everything," said Arnold Berman, technology strategist with SoundView Technology Group. "Do you believe everything you read in the newspaper? Do you believe everything you see on TV? You must be vigilant and sceptical."

Asked if he thinks the recent hoax will prevent people from using the Internet as an investment tool, he said: "No, but people will have to be more careful."

The hoax is not expected to frighten companies out of using the Web to communicate with investors and the public. "The benefits of using the Web far outweigh the risks," said Louis Thompson, chief executive of the National Investor Relations Institute, a trade organisation for executives that act as liaisons between their companies and investors.

"The Web has revolutionised the way that companies communicate with investors," he said. "They have been looking for a cost effective way of communicating with individual investors and the public. It's too late to turn back the tide now. But companies will have to be more vigilant to make sure this doesn't happen in the future."-Reuters