HOW TO BOOST STOCKS.

Means Are Many, Some Are Honest

THE more primitive Wall Street shenanigans to rig the price of a stock have long been outlawed. But Wall Street is confronted with a new, more complicated phenomenon: the growing refinement of the art of running up a stock by legitimate publicity techniques--and by some not so legitimate. This year the number of people criminally indicted by SEC for false or misleading stock information has increased 38%. The New York Stock Exchange, concerned over the flood of inside tips on corporate developments, last week issued a warning reminder to listed companies that any information likely to affect a stock's price--whether about dividends, new products or new management--should be made public at once.

In the past, some hot tips have put the tippers in hot water. Two years ago Speculator Louis Wolfson, then chief stockholder in American Motors Corp., announced that he was selling his American Motors stock because he thought it had reached its peak. Actually, he had already sold out, and sold short, hoping the stock would drop, making him additional profits. SEC quickly stepped in and froze his holdings. Result: when the stock rose instead of dropping, Wolfson lost heavily.

Stock-boosting maneuvers are not always so easy to identify or trace. TelAutograph stock zoomed from 9 to 24 in eight hectic trading days last fall after the company created the impression in a press release that it had a franchise on a machine able to transmit writing over telephone wires. The SEC set the record straight (TelAutograph had the machine, but not the only one of its kind). Three weeks ago Sperry Rand Corp. privately showed a group of stock analysts a new product for a computer, although the official announcement was one week off. The company also sent out hold-for-release stories to the press. Within two days, predictably, Sperry stock shot up 4 3/8 points. The New York Stock Exchange "suggested" that the company declare at once all details about the product. It did. Ever since Manhattan Lawyer Roy Cohn, onetime aid to the late Joe McCarthy, bought Lionel Corp. a year ago, the model-railroad maker's stock has risen, helped by better earnings, rumors, new flashes and promotional splashes. A month ago Lionel President John B. Medaris was scheduled to speak before the prestigious New York Society of Security Analysts, and word went around that there he would reveal that Missile Expert Wernher von Braun was joining Lionel. Next day Lionel was the second most heavily traded stock on the Ex change, jumped two points. Medaris had nothing to say about Von Braun, except to deny the rumor.

Stock price boosting succeeds so well because Wall Street is full of investors looking for a lower-priced stock that may develop a new electronics or space product and become a fast-rising glamour stock. The spread of stock-option plans as a form of executive compensation has made stock-minded men of many corporate bosses who once paid little attention to Wall Street. An option is good only if the stock rises. Merger-minded companies also want their stock to have a higher price-earnings ratio; it gives them an advantage in a stock-trading merger with another company.

Much of Wall Street publicity is simply old-fashioned drum beating: one West Coast company annually sends its executives east on a speaking tour, mothered by their public-relations men. "By watching the stock tape," says New York Times Financial Writer Burton Crane, "I can usually tell how far east they've reached. About the time they reach Cincinnati, the stock starts jumping and keeps rising until they get to New York." The good word is often spread through press conferences, news releases, well-written company reports. These devices do not bring any protest from the stock exchanges; what they object to is the furtive telephoned tips to a newspaper, the phony rumor passed on to brokers, the information passed on to a favored few.

The news is also spread by talks to security-analyst luncheon clubs, which have sprung up all over the U.S. While they provide a valuable forum for businessmen to discuss the prospects and progress of their companies, they also provide a natural springboard foi advance rumors such as the Lionel-Von Braun story last month. Wall Streeters object to confidential briefings in advance for friendly analysts; stockholders might well object when executives serve their news at lunches instead of releasing it generally.

While false or flashy stock pumping may result in a sudden spurt, stock juggling often means only trouble in the long run. A stock that is constantly running up and down on unfounded rumors soon gets a bad name among long-term investors, the type of stockholder that corporations want. All Wall Street might take a lesson from the biggest U.S. company, American Telephone & Telegraph Co. Last week it announced an increase in its dividend (see State of Business) without so much as an advance whisper reaching the Street.

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