Jag Media Suit Targets Short Selling
VANCOUVER, Wash. -- Jag Media Holdings Inc., which streams market news over the Internet, is dragging the nation's largest brokerage companies into a Texas court in an effort to halt a short-selling campaign that management claims has nearly destroyed the company.</br></br>Stocks of thinly traded upstarts such as Jag Media are prime targets for short sellers. Companies that feel victimized by the shorts have tried to squelch them in court before without success. But this lawsuit opens a new front by alleging that sloppy bookkeeping by the nation's brokerage companies abets the shorts by letting them sell short more shares than they can legitimately control.</br></br>In June, Jag Media Holdings filed suit in District Court in Harris County, Texas, against more than 100 brokerage companies, including Merrill Lynch & Co. and the Brown & Co. unit of J.P. Morgan Chase & Co. alleging fraud, negligent misrepresentation and violations of securities law.</br></br>The suit alleges the brokerage firms failed to properly close short sales by identifying and borrowing shares and taking possession of shares as required by securities regulators.</br></br>Short sellers borrow a stock and sell it in hopes of replacing the shares at a lower price in the future and pocketing the difference.