Federal regulators have undertaken an informal investigation in the anonymous online postings of John Mackey, the chief executive of Whole Foods Market, some of which denigrated a smaller rival grocery chain and that raise novel questions for securities watchdogs.
Mackey's postings over seven years on Internet financial forums, cloaked under the name "rahodeb," at times attacked Wild Oats Markets , calling its stock overpriced and predicting it would fall into bankruptcy and then be sold after its shares dipped below $5. Whole Foods announced in February that it would buy Wild Oats for around $565 million, or $18.50 a share.
The Securities and Exchange Commission has begun its probe into the postings, which came to light last week as part of a lawsuit by the Federal Trade Commission to block Whole Foods from buying Wild Oats on antitrust grounds. The trade agency contends that the sale would combine the two largest organic and natural-foods retailers and raise prices for consumers by concentrating too much power in one company.
The SEC inquiry was first reported late Friday by the Wall Street Journal online. Agency spokesman John Nester declined to comment, as did Sonja Tuitele, a spokeswoman for Wild Oats at its headquarters in Boulder, Colo.
Kate Lowery, a spokeswoman for Austin, Texas-based Whole Foods, said Sunday the company had not been contacted by the SEC about the probe. She declined to make further comment.
Whole Foods has said that Mackey's online comments, made from 1999 to 2006, were being taken out of context years later. He wrote them under a pseudonym (a derivation of his wife's name, Deborah) "to avoid having his comments associated with the company and to avoid others placing too much emphasis on his remarks," the company said.
It is unclear whether the CEO's anonymous broadsides may have violated securities laws.
"It seems more embarrassing than a violation of law," said Kenneth Scott, a professor of law and business at Stanford University.
To make a case for securities-law violations, the regulators would have to prove that Mackey intentionally used his postings to try to manipulate the stock price of Whole Foods or Wild Oats -- a legal move that could be difficult, Scott and other experts said.
"There's a problem in establishing any kind of a causal connection," he said.
Donald Langevoort, a former SEC special counsel who teaches securities law at Georgetown University, acknowledged that the agency is obliged to look into the Mackey matter as part of its diligence.
Still, he said, "It's going to be very hard to turn ... (it) into a serious fraud case."
Alluding to Mackey's postings, he asked, "Isn't this part of the noise that fills the air in the world of investing, that no serious investor really takes seriously?"
The SEC "is not likely to find fire," Langevoort said.
The agency might examine whether Mackey's comments violated its "fair disclosure" regulation. That rule, however, specifically prohibits companies from disclosing information to stock analysts and other Wall Street insiders ahead of the public.