Re: 8/25/00 - Emulex plunges amid hoax news item
Emulex plunges amid hoax news item
By Jeffry Bartash, CBS.MarketWatch.com
Last Update: 12:32 PM ET Aug 25, 2000 NewsWatch
Latest headlines
COSTA MESA, Calif. (CBS.MW) -- Shares of Emulex dived 60 percent Friday and were halted from trading after a fake press release said the maker of computer-networking gear would revise fourth-quarter earnings lower and face a probe of its accounting practices.
A spokeswoman for Emulex (EMLX: news, msgs) said the press release in question -- issued through an electronic service called InternetWire -- was actually a hoax.
After Emulex shares fell 68 1/16 to 45, trading was halted. By that time, the company's market value had plunged from $4.1 billion to $1.6 billion overnight. Listen to the radio report.
The bogus press release stated that the Costa Mesa, Calif,-based company would reverse fourth-quarter results to a loss of 15 cents a share from the initially reported gain of 25 cents. It also said Chief Executive Paul Folino would resign and that the company's accounting practices would be investigated by the Securities and Exchange Commission.
The SEC, citing agency policy, would neither confirm nor deny the existence of an investigation into the incident.
While not commenting on the Emulex situation, SEC spokesman Chris Ullman said the agency has "countless times" warned investors that they should rely on a "variety of information, not one item in particular."
"People should look at the source of information and then do their due diligence in terms of confirming it or denying it," Ullman said.
Wall Street pros agreed.
"I've never seen anything faked like this in all my years in the market," said Barry Hyman, senior market strategist at Ehrenkrantz, King, Nussbaum, who began his career in 1983.
"This is a lesson," he said. "You never invest on headlines, you invest on research." Ehrenkrantz does not hold any Emulex shares.
In fact, the Emulex hoax does have a parallel with a scam last year involving PairGain Technologies. In that case, however, the company's shares soared after a fake report that it would be bought out.
An employee was later charged with orchestrating the release of the fake item. He was eventually sentenced to five months home detention, five years probation and ordered to pay $93,000 in restitution.
cbs.marketwatch.com
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Audio: EMLX Halted After Falling 50% on Hoax Press Release
vuwin.on24.com
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Emulex Plunges on Hoax Press Release
8/25/00 11:00 AM ET
Emulex (EMLX:Nasdaq - news) Friday disavowed a press release that sent its stock plunging 57% before it was halted.
The company said the release, which detailed an earnings restatement and an executive change, was a hoax.
thestreet.com
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Emulex Still Halted After Press-Release Hoax Punishes Stock
By TSC Staff
8/25/00 12:40 PM ET
Updated from 11:58 a.m. EDT:
Emulex (EMLX:Nasdaq - news) plunged 57% Friday on what the company says was a hoax press release.
The stock remained halted at midday, two hours after the hoax started showing up in financial news reports. The hoax wiped more than $2 billion off the stock's market capitalization, leaving it around $2 billion.
The release, which appeared on the Internet around the time of the market's opening bell, claimed Emulex would restate fourth-quarter earnings to swing to a loss from a profit, and that regulators were probing accounting irregularities. The release also claimed Emulex executives were stepping down. The company, based in California, vehemently disavowed the release.
"It's totally bogus," said an Emulex spokeswoman. "None of the information is true. It's business as usual." The spokeswoman added that the company was in the process composing a press release to that effect, and trying to track the source of the hoax through Nasdaq and the Securities and Exchange Commission.
Distribution
The false press release first appeared on Internet Wire, an Internet-based distributor of corporate news, at around 9:30 a.m. EDT. It was then distributed to a number of other news services, notably Bloomberg. The press release wasn't distributed by the leading business press release disseminators, BusinessWire and PRNewsWire, and didn't appear on one of the leading Net news aggregators, Yahoo! Finance.
But around quarter after 10 in the East, price alerts detailing the stock's drop -- though not indicating any news -- started popping up. Then, starting shortly after 10:30, leading news organizations such as Reuters, Dow Jones News Service, CBS Marketwatch and TheStreet.com ran headlines on the release, detailing the supposed restatement, probe and executive departure news.
Nasdaq halted trading in the stock at 10:35. It wasn't until around 11 a.m. that Emulex's disavowal of the release started making the rounds of the financial wires, Web sites and television channels.
Shares of network-card maker QLogic (QLGC:Nasdaq - news), which was spun off from Emulex in 1992 and is now independent, also took a dive Friday morning. Shares of QLogic fell as much as 35 11/16, or 32%, to 74. At midday, the stock was down 5 5/16, or 4.8%, to 104 3/8.
Incarceration
"Someone's going to jail," said Todd Clark, head of listed trading at W.R. Hambrecht. "I'm glad we don't own it.
"How do they resolve this?" the trader continued. "Do you break all the trades? What do you do?"
"It's scary that a rumor that effective can get floated," said Tony Cecin, manager of Nasdaq trading at U.S. Bancorp Piper Jaffray. "This isn't going to go away fast. The market cap swing is in the billions."
thestreet.com |
