CUDECO founder Wayne McCrae (pictured) has ripped into share market discussion board HotCopper ahead of its IPO, saying it would be 'crazy' and a 'joke' if the business was able to list.

Typical to form, the website will attempt the feat on September 8 in controversial circumstances: the company has no managing director and the owners of HotCopper's operating company, Red Card, plan to raise $12 million by selling their majority stake, but will only use $1 million of that on improving the website.

Given that the content contained within the message boards is called 'questionable' by a noted proponent of free speech, there are question marks surrounding how shares in a communication device that has been used to manipulate the stock market can trade on such a market.

Stephen Mayne, Director of the Australian Shareholders Association, gives a good indication of the line that HotCopper straddles.

"HotCopper doesn't have a great reputation, because it hosts questionable public commentary on listed companies, some of which is designed to manipulate share prices," the founder of Crikey tells Business News Australia.

"However, it is also a long-standing debating platform for day traders and an example of free speech in action. All parties are entitled to have their point of view, including any company which believes inaccurate information has been posted."

McCrae, who was last year pushed out of CuDeco by its shaerholders, certainly has a point of view, after being harassed on boards by an anonymous user for six years.

"It's crazy," he says when told of the IPO. "If it was in a newspaper you would get sued, but on HotCopper you can do it anonymously; it is a f***ing joke."

McCrae won a Federal Court case against HotCopper in June 2015 (McCrae v Reynolds [2015] FCA 529), after years of legal battles, in an effort to obtain documents relating to a forum user with the alias 'zzedzz', who had been posting defamatory material about him on the site.

But defamation isn't his only concern with the site.

"If you asked me, it is the biggest scam in corporate history; it is manipulated by people who are shorters in the market. That is all it is, and nothing more."

The company, which is forecast to make a $609,000 loss in FY17, is offering 110,000,000 new shares. Of those, 61 million will be sold at 20c each to raise $12.18 million, and 49 million will go to the nine shareholders of Hot Copper's operating company, Report Card, with David Brian Argyle being the major shareholder, with 1037 shares.

The owners of Report Card will raise $12 million, will keep $10 million and then, of the remaining $2 million, half will be spent on the website, $683,000 will be taken as working capital and the rest spent on costs associated with the offer.

The company is directed by Steve James (chairman), Alec Pismiris (non-executive director) and Geoffrey Reilly (a temporary executive director hired for 12 months, or until an MD is found).

Back in 2012, then managing director Greg D'Arcy told the Sydney Morning Herald that HotCopper received an average of two legal threats a week and its team of 10 volunteer moderators caught 50 defamatory posts per day. HotCopper is pursuing its IPO without a managing director, after D'Arcy resigned without explanation after eight years in the role.

Today, the site has 235,000 registered members and had 623,806 unique visitors in May 2016, compared with 217,000 in January 2013. The number of site visits was 18 times higher than its closest competitor, which is probably TopStocks.

McCrae scoffs when asked about the site's moderation process: "The moderators are the same people who are posting on there, it is a f***king joke."

Currently, the site is not able to undertake real time moderation of posts, and the company admits defamatory material has been added to the site in the past.

HotCopper did not respond to a request for an interview, but in its IPO states:

"It can be, and has been, the case that some postings contain defamatory material or material that may otherwise give rise to legal claims. In instances where this has occurred, HotCopper has moved as quickly as practicable to remove such material."

A number of legal actions have been launched against the site, but it says most are demanding information in possession of Hot Copper, with the intention of proceeding against the individual, rather than the website.

"To date, all of these matters have been resolved without any liability or penalty accruing against HotCopper.

"There is a risk, however, that if in the future HotCopper is the direct target of a legal action, this may lead to a ruling from a court which may find that HotCopper has liability for material posted on its website. Were this to occur, then HotCopper's exposure to legal liability and potential damages would be significantly increased."

Recent record defamation payouts in both Queensland and NSW have hit $300,000, a risk to profits when the company's revenue was $2.59 million in FY16, and profit was $880,626.

The company could also face a threat such as American businessman Peter Theil, who pursued a vendetta against Gawker by funding the defamation claims of various people, including former pro wrestler Hulk Hogan.

One protection the boards do have is that companies with more than 10 employees cannot sue for defamation in Australia, as Mayne explains.

"The Howard Government changed the law and banned companies from being able to sue for defamation, which was an important reform that has helped HotCopper stay in business given the nature of the rumours and speculation that it often publishes," he says.

There is also the potential, as a listed entity, for a hostile takeover of the company in order to shut down the commentary contained within its boards.

Veteran journalist and media analyst Peter Cox knows too well the impact shareholders can have on a listed media company. He made a tilt for the Fairfax board in the tumultuous period around 2012, when Gina Rhinehart tried the same thing in a move many perceived as a threat to the newspaper's editorial coverage.

"It is very difficult in our industry, whether it is Sky or the ABC, because the companies try to bully their way through," says Cox.

"They withhold giving interviews, they have PR people prepare the executives and then they can put financial pressures on the company on the advertising side of things.

"All that is a problem, and I am happy to make that point.

"However, trolling, whether it is teenage girls, or whether it is famous stars, or whether it is executives of companies, I don't like that business of anonymous trolls that we have going on.

"Even Rupert Murdoch, I've seen people say things like 'I hope you die old man', and I can't see how that is constructive at all. They post it anonymously and they have no courage."

Mayne believes the HotCopper IPO will soon run into hurdles.

"The business establishment, including ASIC and the ASX itself, won't be happy to see a company like HotCopper garner more public attention through an IPO, so I wouldn't be surprised if a few roadblocks emerge that make the listing process difficult to complete."

In fact, Hot Copper has already jumped some ASIC roadblocks. A spokeswoman told Business News Australia that the exposure period on the prospectus was extended on August 3, and an interim stop order was issued on August 12, but was revoked on August 18 following the lodgement of a supplementary disclosure statement.

The website is only able to operate because the Regulatory Guide 162 (RG 162) specifically permits an internet discussion site to operate without an Australian financial services licence, provided that it complies with the terms of RG 162. ASIC could change that rule and put Hot Copper out of business.

McCrae would like to see regulators at the ASX and ASIC to do more to police the site.

"It is like HotCopper is a drug dealer, but instead of arresting them, they are buying drugs," he says.

An ASX spokesman confirmed it has received an application to list from Hot Copper and 'the application will be considered and is subject to the usual processes'.

Naturally, debate is thriving on the HotCopper threads dedicated to the company's IPO, and there are plenty of moderated comments.

The company was founded in 1994 as a bulletin board then migrated to the internet in 1995. It was listed on the ASX for the first time in 1999, but that was short lived, as by 2000 it became a division of Bourse Data. That company was later merged with St George Bank, which then sold HotCopper to Perth-based Report Card.

HotCopper's known legal tangles


The founder of Phytotech, Australia's first medical marijuana company, Ross Smith, says he is going to sue HotCopper over a "vendetta" against him on the forums. "I am going to sue HotCopper because of the clear and blatant disregard for their own posting rules and major breaches of ASIC regulations in regards to the incredible personal attacks on me. They might as well just have a posting thread of 'I hate Ross Smith'," he told Sydney Morning Herald.

After years of litigation, Wayne McCrae gets a judgement in his favour in the Federal Court of Australia. The judge declares that HotCopper should hand over information relating to the identity of a user named zzedzz.


Managing director of HotCopper Greg D'Arcy reveals he was forced to remove the entire conversation history relating to Empire Oil & Gas, which included 60,000 posts. ''There is no freedom of speech in Australia,'' said D'Arcy. He told the Sydney Morning Herald that HotCopper receives on average two legal threats per week. In response, the company has its servers and database offshore. Martin Bennet was also involved in the Empire Oil & Gas case. He says Excalibur Mining and Samson Oil issued legal threats in the week before the story.


A fake drilling report posted to the Voyager Resources forum by user Ronny2011 led to the company's share's shooting up 6 per cent in value within an hour. They were quickly placed in a trading halt and the post was exposed as a hoax.


Chairman and managing director of Perth-based Datamotion, Ronald Moir, was awarded $30,000 by the Supreme Court of Western Australia after being defamed by Graeme Gladman, under the alias 'witch'. HotCopper refused to hand over Gladman's details, but Moir's solicitor, Martin Bennett, somehow tracked down Gladman himself.

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