Efficient Market Hypothesis and the Implications of Non-disclosure
A continuing blog on maximizing insider and non-insider small-cap shareholder value.
Efficient Market Hypothesis (EMH).
"...In finance, the efficient-market hypothesis (EMH) asserts that financial markets are "informationally efficient". The weak version of EMH suppose that prices on traded assets (e.g., stocks, bonds, or property) already reflect all past publicly available information. The semi-strong version supposes that prices reflect all publicly available information and instantly change to reflect new information...." What happens when a company withholds material information? Disclosure simply normalizes inefficiencies esp with microcaps/smallcaps. Conversely, non-disclosure of material information can be a precusor/incubator for insider trading including accumulation of shares to gain a controlling position.
Microcap Geeknet (LNUX) is not [fully] disclosing said "new information" and appears to be allegedly [potentially] exposing CEO Kauffman, Geeknet's officers, and Directors to alleged violations of Section 406 of the Sarbanes-Oxley Act of 2002, SEC Rule 10b-5 in re: reliance, causation, omissions, selective disclosure and related State and Federal Securities laws. So, what exactly is The Blueshirt Group doing for Geeknet (LNUX)? I have never witnessed a Company with [no] investor relations whatsoever. None. So the question one must ask, and especially a question any non-insider shareholder must ask is, Why?
In addition to the legal implications of this allegedly dangerous, wreckless, and negligent course of action Kauffman is conspicuously avoiding selling this Company to its own shareholders and potential/future geek consumers/shareholders, Wall Street Analysts, Market Makers, et al.
[13:53] "...In closing we're seeing early signs of success from our investments. In 2010 we'll continue to speak openly and take risks. We'll continue to invest and when those investments don't deliver as expected we'll move on but when they work we'll double and triple down to drive this business forward...". Source: Scott Kauffman, Q4 Conference Call, February 11, 2010.
So, why isn't this same mindset "doubling and tripling down" with full disclosures of Geeknet's substantive successes*?... if not simply to keep Geeknet's incremental successes in front of the street. Also one [never] knows when/who will take notice e.g. (Best Buy:BBY), (Amazon:AMZN). Timing is [everything]. Why is Kauffman appealing to geeks as customers and selling LNUX's 40+ million unique views/month to Madison Avenue but is shutting out geeks (and everyone else) as shareholders? No investor relations/non-disclosure is simply a preemptive strike at maximizing shareholder value [destruction].
*successes e.g. Q4 2010 turnaround, Zacks' Strong Buy, ThinkGeek's 42% increase in eCommerce revenues, ThinkGeek's 617,407 YouTube views, The Twitter 2010 Shorty Awards held March 3rd, Category: Customer Service, ThinkGeek, Finalist and 1st runner-up, behind Comcast (Winner) and ahead of F-1 Team McClaren. Not bad...but no one knows. This continuing pattern mindset is why Geeknet (LNUX) shares have flatlined and arguably trade below iiquidation value.
Again, the question one must ask, and especially a question any non-insider shareholder should be asking is, why? and arguably one the SEC should be asking viz-a viz Geeknet Directors Present, Sileck, and Bowman, not to mention Item 9B, Geeknet (LNUX) s recently filed SEC Form 10-K for the year ending December 31, 2010.
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