Titan Challenges Unnamed Short Sellers in Lawsuit

By Nick Wakeman, Senior Editor


AUG. 31 - After seeing the value of its stock plunge by $1 billion since May, Titan Corp. of San Diego is fighting back by filing a lawsuit Aug. 30 against unknown short sellers.


The company, which does government systems integration work and makes food pasteurization equipment, claims that short sellers are posting anonymous messages on Internet bulletin boards, issuing anonymous false reports and using the media to spread false statements and rumors.


Since May 1, Titan's stock has fallen from $44.75 to $21 on Aug. 22. On Aug. 31, Titan's stock closed at $24.62, a drop of 38 cents from the day before.


Short sellers make their money by buying shares on margin, then selling them in the expectation of buying them back after the price has gone down.


"Titan has drawn a line in the sand," said Gene Ray, Titan president, chairman and chief executive. "We will protect the interest of our shareholders. Titan will not tolerate irresponsible and illegal manipulation of its stock."


According to Titan's lawsuit, short sellers allegedly have forced the stock onto a roller coaster. The price dropped from $44.75 May 1 to $28 May 25. After rising to $44 June 20, short sellers forced the stock back down to $21 by Aug. 22.


"Titan will smoke out and expose the short sellers who wreak havoc in the lives of investors and force them to disgorge their ill-gotten gains," said Marshall Grossman. Titan has hired Grossman and his partner Michael Sherman of the Los Angeles law firm Alschuler Grossman Stein & Kahan LLP to prosecute the lawsuit.


"We will follow their trail from the birth of their schemes into the trading rooms. We will remove their cloak of anonymity so that the world will see how these operators spread false information on Internet bulletin boards and through the guise of so-called analysts reports as well as through the financial media," he said.


Titan is comparing its woes to that of Emulex Corp. of Costa Mesa, Calif. Emulex, which makes fiber channel products, lost $2 billion in market value in 15 minutes Aug. 25 after a false news release was distributed saying that the company's chief executive had resigned and that it had been forced to restate its 1998 and 1999 earnings. The stock bounced back after the news release was found to be a hoax.