business news in context, analysis with attitude

The Wall Street Journal and numerous other newspapers have a fascinating story this morning, reporting how Whole Foods CEO John Mackey used an online alias in chat rooms to plug his own company’s stock and belittle the operations of his rival, Wild Oats – the very company that Whole Foods currently is trying to acquire.

The alias was “Rahodeb,” which is an anagram for “Deborah,” which is Mackey’s wife’s name.

Using the alias, according to the story, Mackey said that Wild Oats’s stores were too small, speculated that Wild Oats would be sold when its stock dropped below $5 per share, and suggested that Wild Oats’s management “clearly doesn't know what it is doing” and that the company “has no value and no future."

The use of the alias came to light when the US Federal Trade Commission (FTC) filed court documents looking to stop the Whole Foods’ acquisition of Wild Oats, which it is opposing on the grounds that it will hurt the competitive balance in the natural/organic foods business.

The Journal reports that Whole Foods has confirmed Mackey’s use of the alias, though it did not say that every one of the “Rahodeb” postings came from Mackey’s computer. The company said that Mackey wrote the postings "under an alias to avoid having his comments associated with the Company and to avoid others placing too much emphasis on his remarks” and that “many of the opinions expressed in these postings now have far less relevance than when they were written."

On his blog, however, Mackey responded to the controversy by saying that the FTC simply was trying to embarrass him as it tries to stop the acquisition. He said he used the alias in the chat rooms “because I had fun doing it. Many people post on bulletin boards using pseudonyms … I never intended any of those postings to be identified with me."

And, he said, “"The views articulated by rahodeb sometimes represent what I actually believed and sometimes they didn't. Sometimes I simply played "devil's advocate" for the sheer fun of arguing. Anyone who knows me realizes that I frequently do this in person, too."

Harvey Pitt, a former Securities and Exchange Commission chairman, tells the Journal, "It's clear that he is trying to influence people's views and the stock price, and if anything is inaccurate or selectively disclosed he would indeed be violating the law” and that "at a minimum, it's bizarre and ill-advised, even if it isn't illegal.”

Mackey did his last anonymous posting – as far as is known – in August 2006.
KC's View:
MNB readers know that I’ve been in favor of this acquisition from the beginning, and that I’ve questioned the FTC position in this case.

That said, if I had any responsibility for Whole Foods’ public image and for making sure the deal actually happens, I think I’d walk into Mackey’s office, pick up his laptop, and throw it out the window.

I make a living shooting off my mouth. But I’m not the CEO of a major corporation with responsibility for an awful lot of people’s lives. Mackey, it seems to me, is becoming something of a loose cannon. I have no problem with him shooting at the FTC, but some of the cannonballs are beginning to land at Whole Foods headquarters.