(May 30 Update: Some have suggested we will no longer post articles on small- and nano-cap stocks. This is absolutely not the case. In fact, we are rolling out enhanced programs to encourage deep, focused analysis of these under-covered companies. On May 29 alone, we published focus articles on CLSN, WIRX.PK and XUII.OB, and we continue to encourage full coverage of this sector that, through good research, can produce tremendous alpha.)
It recently came to our attention, thanks in no small part to our friends at The Motley Fool, that between March 20 and April 16, we published five articles that included coverage of Goff Corp. (OTCPK:GOFF), a nano-cap stock that is now being sued for illegal stock promotion. We regret that these articles were published, and want to share with you, our readers, where we failed, what we are doing to address these issues, and how we intend to work with you to maintain the trust you place in us.
Where We Failed
We have added several new steps to our editorial processes over the past 18 months in an effort to prevent this sort of abuse. This situation makes it clear these were not sufficient.
Our working rule on micro-caps has been that to be the focus of an article, a stock must either trade for $1 per share, or have a market cap of more than $100 million. But if a stock was included as a secondary idea or as part of a "list" article, we provided more abeyance so that we could give readers a depth of coverage in context of the industry. The policy placed faith that our authors would perform the requisite research before including a micro-cap stock in their work. In the vast majority of cases, that trust has been well placed. But it's painfully clear now, as the author of the policy, that that trust in 100% of our contributors was misplaced.
In addition, in one article, GOFF was listed as a feature stock. The article lacked the depth necessary to be considered a focus stock, and the error was human, but not excusable. We have rectified that post now, including adding a note acknowledging our error. On behalf of the editorial team, I apologize.
How We Are Addressing Our Failure
First, we have conducted a review of the authors that posted these articles and for a variety of reasons in addition to this event, they will no longer be contributing to Seeking Alpha. It bears noting that we have no evidence that any of them were complicit in any illicit activity.
Second, we have reviewed our editorial processes and, as noted above, found them lacking. Therefore, we will be updating them as follows: First, in order to be included in an article, a stock will have to be trading at $1 or more per share AND have a minimum market cap of $100 million. If an article focuses on a single stock, we may make an exception in cases where we believe there is extreme value to our readers, and where the article provides deep, balanced research. While we recognize that a "one-size-fits-all" rule will inevitably impact our legitimate authors, our concerns over illegitimate stock promotions are such that we have to err on the side of caution.
But we will not stop there. In order to prevent inappropriate stocks being covered and potentially manipulated, when we receive an article on a stock that doesn't meet the $1/$100 million threshold, we will conduct a secondary review to see if it is part of a paid promotion. You'll forgive me for not sharing the precise review process in a public forum, but suffice it to say it will be robust. When questionable stocks are identified, submitting authors will be dealt with firmly.
Calling On the Strength of our Community
We can't sit on this revised process and expect it to be perfect. So we are calling on our strongest asset, you, our readers and contributors. We respect the trust you place in us, and value the depth of your collective knowledge. We forbid third-party paid research, and authors are required to confirm that they have no existing business relationships with the companies they cover. So let's work together.
If you are aware of a promotion, or of a company that is soliciting positive coverage, or if you see anything on Seeking Alpha that gives you pause, send me a note at firstname.lastname@example.org. I will follow up with you promptly.
We recently celebrated an amazing milestone of 2 million registered users. I defy those that would seek to abuse the investing public to outflank that strength. Let's work together to protect our fellow investors.