June 19, 1998


Mike Schindler isn't usually surprised at the get-rich quick schemes that clog Internet newsgroups and E-mail boxes. But he had never seen an offer quite like the one from a Web site called The site is giving away -- free -- 700,000 shares of company stock. "I've seen all kinds of pyramid-type things. Most of them ask you to send in $5 or $10, but this guy's not asking for any money, so it was rather unique," says the 52-year-old retailer from Harrisburg, Pa.

Unique, indeed. The Travelzoo site, whose free-stock promotion has been making the rounds via spam E-mail, is a curious mix of sophisticated marketing and old-fashioned hucksterism. It promises any user who submits an E-mail address and a first name three free shares in Travelzoo, which to date is a meager collection of links to other Web sites. Of course, these aren't exactly shares of Microsoft you're getting: They have no value at the moment, are registered to a shell or "International Business Company" in the Bahamas, and are issued via the company's "electronic registry," rather than by means of hard-copy stock certificates.

Even if they did have a fixed price, they could not be sold publicly because the Bahamas has no stock market. "That doesn't look reasonable," observes Iqbal Singh, manager of bank supervision at the Central Bank of Bahamas. "Without payment, why would they give away shares?"

Marketing, of course. Building Web traffic can be an expensive proposition, though Netizens are notorious for flocking to free contests and giveaways. What better way of attracting new visitors while also sewing up repeat customers, who might check back to find out how their "stock" is doing? Schindler has a different idea. He suspects the site operator might flag registrants as "gullible," and later try to sell them some sort of penny stock. He has since filed a complaint with the U.S. Securities & Exchange Commission, while also posting concerns to a public newsgroup. "Anytime anyone is giving anything of value for free, you know something is up," he warns.

Still, it's easy to see Travelzoo's take-a-lark appeal in light of the legion of investors who've helped push untested Internet stocks to oxygen-thin highs. After all, the site reminds its visitors, "the most popular sites on the Internet are worth close to $1 billion or more..." And while there's no way of measuring how many users have registered for the free shares, Web searches turned up some 15 people hunting for new Travelzoo enrollees online. (Registrants are encouraged to sign on others and are rewarded with an extra share -- up to a maximum of 10 -- for each new recruit they bring in. "You received your shares in exchange for your promise to help promoting [sic] the site by telling other people about it," a notice on Travelzoo explains.)

What is the company doling out the freebie stock? It's a Palo Alto (Calif.) outfit called Ralph Bartel Internet Ventures, which also operates an identical free-stock plan at Attempts to reach Bartel were unsuccessful, but Business Week Online was able to locate his brother and business partner, Holger Bartel.

Holger Bartel concedes that Net users "could be suspicious" about the aims of Travelzoo -- that people could perceive it as a way of "just accumulating a huge E-mail list and selling [it.]" He declines, however, to comment on the site's mission or business plan, only saying that Ralph Bartel will issue a detailed press release about all that in a "week or two." Meanwhile, Holger Bartel points out, "I didn't start this." He says that he has "just helped him [brother Ralph] a little bit."

Whatever the site's fate, its stock is not necessarily outside the SEC's jurisdiction. Its rules apply to any security offered in the U.S. from a foreign country. According to SEC spokesperson John Heine, "offering" doesn't necessarily mean "for sale," but rather for "anything in return." For instance, he describes an instance in which stock was being given away with the sale of bottles of ketchup, a practice that eventually required SEC approval. For the SEC to look into the Travelzoo offering, the agency would first have to establish that registrants were giving something -- such as information -- in exchange for the shares.

Perhaps, then, the SEC will be one of the most avid listeners when Ralph Bartel gets around to explaining the purpose of his stock-giveaway plan.

By Dennis Berman
Staff Reporter
Business Week Online

*Correction: This story characterized Holger Bartel as a "business partner" in Holger Bartel has written to us stating that he is not a business partner of his brother Ralph Bartel and that he is not associated with

News Flash Archives

Copyright 1998, Bloomberg L.P.
Terms of Use