Harvard Professor’s Blog Post Makes Blinkx Stock Price Plummet
How much power can one person have over the market? In the case of Benjamin Edelman, an associate professor at Harvard Business School, the answer may be “a significant amount.” On January 28, Edelman published a blog post alleging that the digital media company Blinkx uses deceptive business practices that raise questions about its business model and revenue reporting. On January 30, Blinkx stock fell 31%, and recovered only 9% of its value during February 3 trading in London.
In his blog post titled The Darker Side of Blinkx, Edelman observed that Blinkx acquired AdOn and Zango, two companies that were notorious for shady advertising practices, including billing advertisers for “tainted traffic”, and installing adware on consumers’ computers without their consent. Edelman claimed that “ex-Zango adware is still sneaking onto users’ computers and still defrauding advertisers” even though Blinkx now owns the company. He also details his use of the Blinkx website, which led him through a morass of low-content pages. The blog post has images and screen-capture video of fradulent ads tied to Blinkx that violate FTC standards.
Blinkx disputed Edelman’s accusation in a statement to the U.K.’s Regulatory News Service, saying “Blinkx strongy refutes the assertions made and conclusions drawn in the blog post. The company confirms there has been no material change to the operational and financial performance or outlook for the business.”
In the blog post, Edelman mentions a mysterious client who commissioned him to do the research, but does not elaborate on who that client is. In a Forbes article, contributor Peter Cohan hypothesizes that Edelman’s client might be a hedge fund. The hedge fund could have shorted Blinkx stock before Edelman posted his blog article. Cohan asks Edelman to reveal whether or not his client is a hedge fund.
In an interview with Forbes, Edelman said “I think Blinkx deserves to rise or fall on its own merits, not the prior businesses of some managers or even its founder. Problem is, Blinkx’s merits are themselves looking pretty shaky.”
