By: Matthew Doman
News Reports Sent Stock Tumbling
by Matthew Doman
(The Hollywood Reporter) The nation’s leading financial media were
acutely embarrassed Friday after reporting as fact a hoax news release
supposedly from Costa Mesa, Calif.-based fiber-optic unit Emulex Corp.
The false news sent Emulex’s share price tumbling 60% before trading
was suspended by the Nasdaq stock market. After the company convincingly
denied false reports that its CEO had resigned and financial results
would be revised to turn past earnings into losses, trading resumed and
Emulex made up most of its lost ground.
The hoax was revealed within 90 minutes.
It might take Bloomberg News, Dow Jones News Service, CBS.MarketWatch.com, TheStreet.com, cable news channel CNBC and others longer to recover.
Another big loser was Los Angeles-based news and information distributor
Internet Wire, whose service was used to publish the hoax news release
– which also said Emulex was being investigated by the Securities and
In a column after the incident, TheStreet.com co-founder James Cramer
admitted that in their rush to beat the competition with apparent
breaking news, his service and others had failed to verify the accuracy
of the release.
‘We really believed that Emulex had imploded and would now disappear,’
he said, referring to the convincing style and language of the hoax
But obvious grammatical errors and missing numbers in the details were
overlooked by most news services. ‘By the time we had read the headlines,
we were in motion,’ Cramer said.
It was not the first time false news releases have been reported as fact,
but it was perhaps the most dramatic example in recent memory.
Emulex, the SEC and other authorities have begun an investigation into
the hoax and a search for the perpetrators – who might have made millions
of dollars from the wild movement in the share price.
Bloomberg and Dow Jones were the first to give credibility to the false
release. The hoax was published on Internet Wire at 9:30 (ET) Friday
morning, and Bloomberg ran the first headline on the report at 10:13
a.m., followed by Dow Jones at 10:40. At 10:57 Dow Jones and, two minutes
later, Bloomberg reported Emulex’s claim that the release was a hoax,
and trade in Emulex was suspended shortly after 11.
But much damage had been done.
Bloomberg editor in chief Matthew Winkler and Dow Jones News Service
managing editor Rick Stine told The New York Times their services had
failed to check the accuracy of the release – or even refer to the fact
that the company was unavailable for comment – in the rush to be first
(c) Copyright 2000, Editor & Publisher