If relatively few shares in a small company are offered for sale, and someone is anxious to buy, the price can rise dramatically. Well, Jonathan described in enthusiastic tones the future, as he saw it, for the stocks he was purchasing. On some days, he would register his beliefs on as many as 200 different Web sites. In many of these postings, he paraphrased the jargon of Wall Street analysts. An article by Michael Lewis in the New York Times Sunday Magazine of Feb. 25 offers a wonderfully readable chronicle of what happened next.
Truth is stranger than fiction.
The Securities Exchange Commission called Jonathan and asked that he report to their New York offices. Blodget had been promoting JDS Uniphase and InfoSpace, which both plummeted. The suit contends that what Blodget did not disclose was that Merrill Lynch was the investment banking adviser for a purchase of InfoSpace by Go2Net. The purchase, which would have generated a huge fee to Merrill Lynch, required that the stock price of InfoSpace remain above a certain level. Allegedly, this may have colored Blodget's thinking.