=DJ Wall Street Hoax Cost Emulex Corp. Investors Plenty >EMLX.. also won traders plenty ;-) Its a sad thing, but if anyone can wield that much power in a rumor, that just takes the wind out of any investor's sails.. I personally did not enjoy any gains from this hoax but there were some good calls in the trading room today. For me I'm still plugging away in my beloved pharmies and biotechs.. and the occasional tech stocks. Holding as few as 5 in my portfolio and as much as 8 but trying my best not to get into a position like the BOL or EMLX investors.. Whatever happened at the end, there were many panic sellers in EMLX today. Its ironic that investors are now actually the speculators, because no one knows what company will be hit next.. As for us traders, we stay as uninvested as possible except for our position trades. I've been hit personally in PCYC.. lossing some profits after triple digit gains, but otherwise no problems except the occasional 2-3% daily trade gone sour. I was surprised when PCYC was hit because of an inflammatory article in Barrons but that reinforced my determination to protect myself from manipulators no matter if they are Barron's reporters, analysts, or actual criminal elements like the ones that perpetrated today's hoax. In the scheme of things the end reults of these 3 sources have the same results. My TEVA was hit for a loss yesterday because some dolt analyst decided it 'might' be gearing up for a selloff. Who is more crooked, the perpetrator of today's crime or this analyst? School is still out there.
By Phyllis Plitch and Carol S. Remond
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--A sluggish summer Friday quickly turned into a
selling frenzy for Emulex Corp. (EMLX) investors as a fake press
release slashed as much as $2.4 billion from the company's market
value at one point.
The hoax underscored the vulnerability of investors and corporations
in a world where information zooms through the market in rapid-fire
fashion.
The loss followed the publication of a news release that appeared to
deliver a host of bad news about Emulex. The release claimed the
company was restating its fourth-quarter earnings, was being
investigated by the Securities and Exchange Commission and that its
top executive had resigned. A spokesman for the company told Dow Jones
Newswires that the release was a fake; later in the morning Emulex
confirmed in a written statement that the release was a hoax.
Whoever was behind the incident chose an opportune time - with the
market in the end-of-summer doldrums - and the kind of news that
investors would readily react to.
By the time regulators stepped in, the damage was done as thousands
of investors unloaded their shares on the spurious information; Emulex
stock plummeted 60% to $45 by the time Nasdaq halted trading at about
10:30 a.m. EDT.
"It's the cockroach theory," said Bryan Piskorowski, a market
analyst at Prudential Securities Inc. "It's the least desired press
release you can come up with" and it came during a lackluster week,
during which "it was easy for the market to grab onto."
The "News" Spread Quickly
News of the press release was circulated quickly by Internet chat
rooms and news organizations, which published the release under the
assumption that its distributor, Internet Wire, had checked out the
veracity of the news. Bloomberg Business News first published the
erroneous release, followed by CNBC-TV. Dow Jones Newswires followed
suit after the stock had been halted.
Internet Wire, a fledgling online news service, confirmed later in
the day that the release was a hoax and said the incident is under
investigation. It said the perpetrator pretended to be a
public-relations agency representing Emulex.
The Emulex incident follows several notorious stock hoaxes
perpetrated in recent years, including one carried out by a former
employee of PairGain Technologies, who published a bogus news story on
the Internet claiming that the company was being acquired by an
Israeli company in a $1.35 billion deal. In that case, the Web site
where the story was initially published was designed to resemble
Bloomberg.com, and managed to fool investors, who pumped the stock up
10% on the story.
Officials at Costa Mesa, Calif.-based Emulex said the company is
working with the Securities and Exchange Commission, Nasdaq and the
Federal Bureau of Investigation to uncover the source of the release.
In Chicago, the Chicago Board Options Exchange said it is
investigating unusual trading in the company's options that occurred
before the release sent the stock plunging. Right before the release
was disseminated by Internet Wire, a floor broker at the CBOE executed
an order to buy defensive put options that would increase in value if
the stock's price declined, an Emulex trader at the CBOE said.
Regulators have had some success in tracking down con artists, who
have found a variety of ways to manipulate stocks, increasingly
through the Internet. But unfortunately for investors caught in the
deceit, they're often left with big losses before knowing what hit
them.
"It's the kind of thing that makes you realize this can happen so
quickly, the impact and effect can be so devastating in such a short
time, that regulators really can't be expected to catch anything that
quickly," said Blake Bell, senior counsel at Simpson Thatcher &
Bartlett. "They may be limited to after-the-fact trying to catch the
culprit."
The stock eventually reopened at 1:30 p.m. EDT, and rose within a
minute as high as $130, recovering all the losses and 15% more. At the
4 p.m. close of regular trading, Emulex was at $105.75, down $7.31, or
6.5%, on the day.
(MORE) DOW JONES NEWS 08-25-00
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