The Wall Street Journal ran an editorial ($) on John Mackey's anonymous internet rants, following the report Friday ($) that the Securities and Exchange Commission (aka, The Man) was looking at his message board postings. In my previous post, I equated Mackey's writings under the name Rahodeb to a stupid dog trick, leading some readers to opine that I missed the gravitas of this transgression.

If Mackey wanted to really move his stock and slam Wild Oats he would not do so by engaging the day traders or whoever else populates Yahoo stock message boards. He would be sharing tofu smoothies and organic energy bars with portfolio fund managers and Wall Street analysts. They have far greater influence. The Journal writes:

The SEC is now going to unleash its army of ambitious 27-year-old lawyers to read these blog posts to see if Mr. Mackey let slip any insider information. The Federal Trade Commission is also using the posts as a PR and potential legal weapon in its campaign to block the Whole Foods acquisition of Wild Oats. The FTC, which apparently hasn't had enough to do, is alarmed that the two organic food purveyors overlap in all of 21 markets. Its gang of ambitious 27-year-old lawyers is already using Mr. Mackey's words against him to portray his takeover attempt as evidence of monopoly intent.

Without having read all of his posts, we can't say what Mr. Mackey might have disclosed. But from what we've read, we can't see how any reasonable person could conclude that Rahodeb's opinions were going to have any appreciable effect on the Whole Foods share price. The fact that they weren't was precisely the point: At a time when corporate execs are often accused of being isolated, Mr. Mackey seems to have enjoyed the Web engagement and used the semi-informed opinions voiced on a Yahoo message board as his own sounding board to sample the mood of his customers.

I agree but think the Journal reads too much into this. He wasn't sampling "the mood of his customers." He was engaging with critics or anyone else who had a bearish opinion of the company he co-founded. Why? Because he likes Whole Foods.

But here's the point. "Mr. Mackey's comments were the equal of any other. Investors who participate on such message boards know that they don't know who's on the other end of their exchanges," the Journal writes. Exactly. He was just one anonymous barking dog among many and there was no reason his bark would carry any more weight. Of course, had he signed the comments truthfully, it would have.

As for the legal issues, the Journal's news story notes:

While it isn't clear that Mr. Mackey violated any laws in his postings, they have raised numerous legal questions. The SEC is likely to examine whether Mr. Mackey's comments contradicted what the company previously said, or if they were overly optimistic about the firm's performance. In addition, the SEC will likely look at whether the CEO selectively disclosed material corporate information -- that could violate a securities law passed in 2000 known as Regulation Fair Disclosure, which was designed to prevent executives from sharing information with favored clients or analysts.

My only question is whether commenting on a Yahoo message board can be equated with dishing up financial information to "favored clients or analysts." The Race to the Bottom legal blog comments (on this and other issues):

...Regulation FD only applies to disclosure to certain types of investors or market professionals such as analysts. It really was not intended to apply to disclosure that was arguably to the entire market.  Disclosure in the Yahoo forum is arguably to the entire market (and, in any event, would arguably meet the definition of "public dislcosure" for purposes of Regulation FD).   

- Samuel Fromartz