Today's UAL Corp. (UAUA-Q) share price incident reveals how easily the stock market can react to so-called "news".
In case, you haven't heard the news, here's The Globe & Mail article on the incident:
False report sends UAL stock on wild ride
STEVE LADURANTAYE
Globe and Mail Update
September 8, 2008 at 3:31 PM EDT
UAL Corp. saw its shares temporarily melt down Monday morning on false rumours that it planned to file for bankruptcy protection.
Shares in the parent of United Airlines were halted on the Nasdaq stock exchange at 11:08 a.m. (ET) after falling 76 per cent. Trade resumed at 12:30 p.m., with the shares down 8.6 per cent from their opening price to $11.25.
Stock quotes had the shares as low as 1 cent in morning trade, but terminals were updated to show an intra-day low of $3.
Morning trades would not be cancelled, the exchange said on its website.
The company said the panic was sparked by an old story from the Chicago Tribune reappearing as current news Monday morning. It was published on Dec. 10, 2002, and detailed the company's $22-million in daily losses and its bid to restructure while under bankruptcy protection.
“Reports that the company filed for bankruptcy are completely untrue and were cause by the irresponsible posting of a six-year-old Chicago Tribune story by the Florida Sun Sentinel newspaper website with the date changed,” the company said in a statement. “The story was related to United's 2002 bankruptcy filing, and United has demanded a retraction from the Sun Sentinel and is launching an investigation.”
The Chicago Tribune distanced itself from the situation Monday afternoon, with a story on its website saying internal tracking records showed that nobody at the paper had touched the original story file since 2003. The Sun-Sentinel and the Tribune are owned by the Tribune Company.
The chain said that the story was picked up early Monday from the Florida newspaper's site by an investment adviser at Miami's Income Securities. He posted the file on Bloomberg, where it would be disseminated to anyone with access to one of the data-company's terminals.
The rumours come at a difficult time for the airline industry, with most major carriers cutting routes and downsizing in a bid to survive higher fuel prices.
UAL reported a $2.7-billion (U.S.) loss in its second quarter, hurt by a $773-million increase in the price of jet fuel. Earlier this year it said it would have to cut 7,000 jobs, ground planes and reduce flights to cope with the higher costs.
