Shopping.com Trading Is On, Up and Down

Shares of beleaguered Internet retailer Shopping.com seesawed dramatically Tuesday in the first trades since regulators slapped a two-week halt on trading March 24 and launched an investigation into possible stock manipulation.

Though shares still can’t be quoted on exchanges or over the counter, trades via telephone or in person showed the volatility of the money-losing Irvine firm’s stock. It opened at $12 a share, soared to $25 and fell to close at $18 a share, down $4.25 a share from its March 23 close.

Separately, Waldron & Co., the Irvine investment banking firm that took Shopping.com public in November, filed a lawsuit Tuesday accusing five former employees of defamation and interference with its business.

The lawsuit also hints that Sen. Alphonse M. D’Amato (R-N.Y.), pushed by a New York brokerage with an interest in Shopping.com stock, may have spurred the Securities and Exchange Commission to issue its two-week trading ban, an uncommon action for the agency.

D’Amato and his aides were unavailable for comment.

The lawsuit, the first of what Waldron and the company say will be several actions they file, signals an aggressive counterattack after weeks of accusations against the two operations.

“There’s been a lot of defaming of my own name and the company name,” said Cery Perle, Waldron’s president. He also is a plaintiff in the Los Angeles County Superior Court suit, which seeks $10 million in damages.

Shopping.com’s chief executive, Robert J. McNulty, declined to comment.

While the retailer’s shares can now be traded, they can’t be quoted on any exchanges or over the counter until the National Assn. of Securities Dealers approves a brokerage as a market maker, an entity that maintains buy and sell prices and stands ready to buy or sell shares at quoted prices.

So far, only Waldron has an application pending to be a market maker, and it could take five days or more for the NASD to act, according to the regulator.

Shopping.com sold 1.3 million shares at $9 each in its initial public offering. The stock peaked at $32.13 last month before retreating in the face of charges that Waldron may have been keeping the price artificially high.

Other brokerages charged that Waldron controlled the stock. John Fiero, president of Fiero Brothers Inc. in New York, complained to the SEC and other authorities and wrote to D’Amato.

His March 12 letter accused Waldron of manipulating Shopping.com’s stock and, based on reports from former employees with whom he talked, accused it of making unauthorized trades and recommending unsuitable investments to customers.

MSNBC reported that Shopping.com’s meager revenue was misleading because purchases by Waldron constituted 23% of the sales. The company, which opened its Web site in July, lost $2.4 million for the nine-month period that ended Oct. 31.

Perle denied all charges, though he acknowledged that Waldron has purchased some merchandise through Shopping.com. He said he didn’t know how much the purchases totaled.

The retailer and the investment banker charge that the stock has been the victim of so-called short-sellers like Fiero, who profit by selling stock they don’t yet own with the hope of buying it later at lower prices.

Perle said that Waldron has filed a complaint with securities regulators that accuses Fiero Brothers of causing the wild swings in Shopping.com stock through its short-selling.

Once an obscure, nearly inactive Northern California brokerage, Waldron moved to Orange County after Perle and two partners bought it two years ago. Perle said last September that the company would grow quickly from 50 brokers to 250 by the end of this year, training young hires under an in-house program.

But turnover is great, and a number of those who left didn’t go quietly. In its lawsuit, Waldron says it fired “for cause” the five former employees named as defendants. None were available for comment.

The suit alleges that the former employees falsely accused Waldron and Perle of unethical business practices and reckless behavior and of forcing employees to buy Shopping.com stock themselves and push it on customers.

“I had numerous clients who were not permitted to liquidate their positions in [Shopping.com] when they placed sell orders,” said one defendant, according to the suit. Another called Waldron “a firm that breaks the law.”

Another said, “We were led to believe that our job was in jeopardy if we did not solicit Shopping.com to our clients as well as our prospects.”

The suit accused them of colluding with Fiero Brothers to file false information against Waldron and to destroy the firm.

Named as defendants are former branch manager Jason Stern and brokers Tamer Youssef, Baharam Mirhashemi, Steven Lorenzo and Brigett Curameng, who now work at National Securities Inc. in West Los Angeles.

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Wild Ride

Shopping.com’s stock closed at $22.25 the day before trading of its shares was suspended by the Securities and Exchange Commission last month. When private off-market trading resumed Tuesday, prices were all over the map, opening at $12 and finishing 50% higher. Closing price before suspension and Tuesday’s hourly closes:

Closing price March 23 $22.25

Closing price $18.00

Note: Prices are private trades only; over-the-counter trading has not resumed

Source: Bloomberg News