Thursday, July 12, 2007
The Wall St. Journal broke the story last night about the weird behavior of Whole Foods CEO John Mackay, and both the WSJ and the New York Times have long print articles about it today. For a period of about seven years Mackay posted, under a pseudonym, blogs that denigrated the performance of rival Wild Oats and praised Whole Foods' management, including his own hair cut. Whole Foods and Wild Oats are now seeking to merge, and the postings, and Mackay's identity, became public in filings with the FTC. (A few weeks ago, we learned about an internal e-mail by Mackay, saying the merger would destroy its competition, which is exhibit number one in the FTC's review of the merger.) Since Mackay apparently stopped the blogging last August, well before the merger discussions started, there does not appear to be any attempt to manipulate the price of Wild Oats stock. Whether anything he said about his own company or failing to reveal his identity could make him liable for securities fraud is more problematic, but courts may well treat these statements as "puffery" or mere opinion, that reasonable investors would not take seriously. Reasonable investors might well have lowered their opinion of Whole Foods if they knew the postings were from its CEO, because it demonstrates such poor judgment, but there is some indication that at least other bloggers guessed his identity. But it is another example of poor impulse control from senior management; at least it's different, and more entertaining, than the run-of-the-mill sexual indiscretion. See WSJ, Whole Foods Is Hot, Wild Oats a Dud --So Said 'Rahodeb' ; NYTimes, Whole Foods Executive Used Alias.