Investment insight
Porter Stansberry’s research slips on biotech investment
As Porter Stansberry’s business grows, investors ask “Can we trust his judgment?” Investigative reporter Brian Deer remembers an early Stansberry disaster as a stock tipster
Porter Stansberry, the Baltimore-based stock tipster, was just getting started in 2003 when he gave investment advice on what he said was a sure bet: a vaccine against HIV. He threw his then-lesser weight behind a South San Francisco company VaxGen Inc, which at the time I had been investigating for The Sunday Times of London.
My scientific sources said that the product stood no chance whatsoever of protecting against Aids – and might even make the virus more deadly – but after visiting the company, Mr Stansberry returned euphoric. VaxGen’s stock would soar, he told punters in the often rose-tinted world of pharmaceuticals and biotechnology. It promptly collapsed. I mean, really bombed.
The shit hit the proverbial in a midnight announcement on February 24 2003, revealing that AidsVax had failed in clinical trials. Porter Stansberry, however, showed himself the contrarian by claiming to be able to prove that AidsVax works and advising his followers to pile in further with their dough. On the day of the announcement, however, VaxGen shed a staggering twenty bucks from its 52-week high and more than $30 from its post-IPO peak. It opened at $3.31.
This triggered the string of emails below, which stand the test of time as an insight into Stansberry Research. Mr Stansberry, who was then being (successfully) prosecuted by the Securities and Exchange Commission, argued that Deer had treated him unfairly, and complained about this and this. The Securities and Exchange Commission, meanwhile, were complaining about this.
From: Porter Stansberry
To Brian Deer
Date: Mon, 24 Feb 2003 11:14:11 -0500
Cc: Matt Turner <MTurner@agora-inc.com>
Subject: copyright request
Brian –
Please remove from your website the material from my BLAST email of February 24, 2003. It is copyright protected and intended for my paying subscribers only.
Also, I have not profited from the shares of VaxGen, nor has my company. Your allegations to the contrary should be corrected immediately.
Thanks,
Porter Stansberry
From: Brian Deer
To: Porter Stansberry
Monday, February 24, 2003 11:46 AM
Subject: copyright
Dear Porter:
Thanks for your email. I have updated the relevant page, which I hope meets with your approval, or at least hours of fun.
Brian
From: Porter Stansberry
To: Brian Deer
Date: Mon, 24 Feb 2003 21:39:04
Subject: copyright
Brian –
Sound familiar?
[Extract from copyright notice at briandeer.com] In the battle to preserve an economic base for original journalism, including the necessary expense, skill and labor invested in what are sometimes long inquiries, it’s vital that copyright is protected. That protection must deny others any right to reproduce the material published on this website, other than, say, as a single copy of a single item for personal reference.
Porter
From: Brian Deer
To: Porter Stansberry
Date: Tue, 25 Feb 2003 08:39:58 +0000 (GMT)
Subject: Re: copyright (fair use)
Porter,
You are not making a point that is square with your complaint. If somebody lifted one of my stories and republished it, I would warn them and, if they took no notice, be willing to sue them in federal court. To protect my earning capacity, I’ve been down that path to some extent and know how the land lies.
If, however, they published annotated extracts from my work for the purpose of demonstrating that I’d written something of consequence that was intentionally false, or with reckless disregard to its truth or falsity, or that evidenced my utter incompetence or unreliability to practise journalism, I would have little choice but to reply, grin and bear it. If the material about me was presented responsibly in a proper context, for a public purpose and without malice, they would be entitled to go ahead. No copyright infringement or libel would arise. That is the law. That is democracy.
It’s also the moral case. Any embarrassment caused to you by the material at my site you complain about is the consequence of your own actions. If VaxGen was the best investment opportunity you have ever seen and you spent $250,000 researching it, as you claim, I’d be too terrified to look at what you might come up with on a hunch. I note that you made your most extravagant claims when the stock was at nearly $20. Hours after your pump email hailing the results of the AidsVax trial, it opened for trading at $3.31.
If you’re telling me that you made an honest mistake and that you are really that stupid, I’d suggest you might consider an alternative occupation.
With regard to the pages, I’ve quoted extensively but not unreasonably in the circumstances. Although there’s a lot I have left out, I don’t comment or edit more heavily in case readers might feel that I’m spinning or misrepresenting you. Only at some length are your techniques made clear.
I could give a detailed critique of what you’ve published, but I’ve no primary interest at present in what you get up to. I’m more concerned with Aids and the search for a vaccine. In that context, I am interested in VaxGen. I should tell you, however, that I’ve already received unsolicited emails from people who say they are thinking of taking action against you. I’m also intrigued to see you referred to on a bulletin board not as Porter Stansberry but as Porker Scamsberrie.
I’m more than happy to publish any reply you may have to the broad implications of the pages in question. If there’s anything more you want to say, please let me know. Should you wish to pursue the matter further, as you implied in an earlier mail, please name your jurisdiction and I’ll be more than willing to come and defend my pages on grounds of fair use and qualified privilege. I think the dispute might receive some attention.
I don’t accept that you were simply misled by VaxGen which, in my view, has been aware for a surprisingly long time that AidsVax was likely to fail.
I can only trust that your techniques serve you better financially than mine serve me.
Brian
From: Porter Stansberry
To: Brian Deer
Date: Tue, 25 Feb 2003 13:17:37
Cc: MTurner@agora-inc.com
Subject: copyright (fair use)
Brian –
I don’t object to your criticism of my work. Anyone who can’t stand a critic shouldn’t walk alone outside, never mind publishing opinions. But what you’re doing is not journalism, nor is it protected by any government that is a democracy.
You state – as fact – that I have committed serious crimes, not merely that I was wrong about the outcome of the first clinical trial for a HIV vaccine. You do so without ever questioning me or without any supporting evidence, except the claims of anonymous sources found, of all places, on a Yahoo! message board.
In fact, your information about me is so bad, you don’t even know in places how to spell my name correctly or that I don’t live, work or publish my newsletter in New York. This hasn’t stopped you from making serious claims about character and from continuing to do so even after I’ve asked you repeatedly to amend your published reports.
Finally, in quite a contradiction from your own copyright policy, you advertised that my materials – without any comments from you – were available on your site. Only after I complained did you add your commentary. And, still, you have not removed any of the text of my complete February 24th BLAST email.
You’ve maliciously libeled me, you’ve stolen my work and now, below, I see you’ve begun to call me names.
This is what you call journalism?
Porter
From: Brian Deer
To: Porter Stansberry
Date: Tue, 25 Feb 2003 15:50:22 +0000 (GMT)
Subject: copyright (fair use)
Porter,
Nowhere have I stated that you have committed any crimes, serious or otherwise. I have not stated that you were wrong about the outcome of the trial. You stand accused of making the most extravagant and unsupportable claims about future stock prices, based on junk information on AidsVax. Your claims about the Wall Street Journal and your prediction that VaxGen’s stock would “soar” after the trial failed speak for themselves and require no commentary from me. The only material from a bulletin board is posted by me as a joke: it’s funny, given the the events of yesterday with VaxGen. I’m grateful for you pointing out that I’ve spelt your name wrong and that you are not in New York. I will make the necessary corrections ASAP. If you have similar points, please let me know. I have not published the complete text of your Blast, which I obtained from a public source, but in the circumstances I believe that I would be entitled to do so, for reasons given already. No materials of yours are available at my site, free or otherwise. You must be reading any reference incorrectly. There are only the two pages of edited extracts, with my commentary, from your pump publications. I have not maliciously libeled you (ask your attorney friend the meaning of “malicious”, if he knows). Nor have I stolen anything.
In a previous email you made similar errors – claiming I had spoken of “allegiance” (you misread “alliance”), that I had accused you of “fraud” (I did not) and that I had called you a “pump and dumper” (the expression appears nowhere on my site).
I think you are getting a little overheated – possibly as a distraction from the very large amounts of money you have cost small investors in VaxGen who, for reasons best known to themselves, trusted you.
Brian
From: Porter Stansberry
To: Brian Deer
Date: Tue, 25 Feb 2003 16:37:41
Subject: copyright (fair use)
Brian –
You’re doing it again.
Below you state as fact that I have cost small investors money in VaxGen. I have done no such thing. At no time did I ever sell anyone a single share of VaxGen. Instead, I presented the investment case of the stock and I recommended it to my subscribers at $5.50 per share [and at more than $26 and many points between], advising them that this was the riskiest stock I would ever consider recommending and advising them to only put 1% of their portfolios at risk. Had anyone followed my complete advice, there is no way they could have lost money – a key point you leave out of your webpage. Furthermore, the material you cite is not even from my newsletter, it is from a promotional piece meant to sell access to my newsletter. It is not my advice: it is advertising about my advice. (Ironically, the letter you state is meant to “pump” the shares of VaxGen do not even give the company’s name).
You have probably never even read an actual newsletter I’ve written because you have never even bothered to call me for comment. You are not a reporter, you are merely harassing me out of some misguided notion that you are entitled to do so because we disagree about the character of VaxGen’s executives and the worthiness of their clinical approach. These are not the actions of a legitimate reporter.
You have committed libel: you state as fact that I have violated the securities laws of the United States and you’ve done so even after I contacted you to correct your malicious “reporting”:
1. You call me a “pumper” which in the context of investment securities has a clear and well understood meaning – that I was promoting the shares of VaxGen in an attempt to make money from its inflated share price at the expense of other investors. You state as fact that email solicitations for the sale of my newsletter are “pump” emails. Pirate Investor is not a stock promotion business and no such investing in the shares of VaxGen took place on our behalf. Were such investing to take place, I would be guilty of securities fraud. There is a well known and commonly understood linkage between “pumping” a stock and securities fraud.
2. You state as fact that I have a business relationship with VaxGen and that the company and I have a common agenda. No such relationship exists. VaxGen does not review, approve or pay for my work. If I had an undisclosed relationship with a company I was recommending in my newsletter, I would be breaking the securities laws of the United States.
Brian – I invite you to call me, to visit our publishing company and to learn more about my newsletter. Last year the average stock in my recommended portfolio went up by 20% during a year in which the market fell. And, though you call me a “pumper,” most of our gains came from recommending short sells on stocks.
My bullishness on VaxGen was based on the company’s science, which I found sound, and, even more so, on the unique risk to reward ratio the investment provided us. As you would see, if you bothered to contact me or read my actual newsletters, our advice in regard to the company was conservative and not at all in the style you claim. Obviously we are disappointed that the market has reacted to the company’s results the way it has, but we believe in time VaxGen’s approach will lead to an approvable vaccine. We continue to recommend a limited risk investment in the company because of this longer term promise.
I’d be happy to speak to you about all of these matters as long as you’ll agree to remove your offending comments prior to our discussion. Just email me a good time to call.
Porter