United Airlines Shares Plummet 75% On Misinformation; Blame Game Begins

from the if-it's-on-the-internet-it-must-be-true dept

Tue, Sep 9th 2008 1:01pm — Dennis Yang

Shares of United Airlines' stock tumbled nearly 75% on Monday after an old 2002 report about a United Airlines bankruptcy filing was picked up and circulated as current. How did this happen? Apparently, a staffer at Income Securities Advisors Inc. did a search for "united bankruptcy 2008" on Google, and found an article on the Sun-Sentinel. Though the article was published in 2002, neither the Googlebot nor the Sun-Sentinel website indicated as much, and the news item was published to Income Securities' page on Bloomberg. Once the story hit the wire, shares plummeted from $12 to as low as $3, and 54 million shares traded hands before Nasdaq halted trading to investigate what was going on. After United issued an official "we're really not bankrupt" statement and the confusion started to lift, shares of United returned to a somewhat normal price.

After all the dust has settled, the finger pointing has now begun. Who is to blame, if anyone? Sure, the Sun-Sentinel published the story on its site with an ambiguous date, but having archived articles on your site isn't a problem. However, they should really make the dates on their articles more obvious, since they apparently have pretty good SEO. As for Google, they are indeed guilty of publishing an inaccurate date, but as we've seen before, their usual recourse is to blame the site for the problem, and, that said, their terms of service clearly state that they are not liable for the accuracy of their data. As for Income Securities and Bloomberg, perhaps they will be more careful next time before they publish stories, or perhaps not. The thing is, mistakes happen (like Bloomberg publishing Steve Jobs' obituary last month) and rumors turn out to be false every day. Income Securities will "pay" for their mistake, since now they will need to earn back the trust of their clients.

For stock traders, timely information translates into moneymaking opportunities. A few decades ago, it would take a few days for the market to react to information (thereby creating a nice opportunity for the shrewd trader). Today, the speed with which information travels (and the market reacts) has increased considerably, as is clearly illustrated by this event. Sure, shares of United are still trading at approximately 10% less than its opening price on Monday, but perhaps that's more a reflection of the fact that a chapter 11 filing would not come as a surprise to anyone at this time. So, it appears that, in actuality, it's pointless to assign blame, since there doesn't seem to be a problem -- the system worked just as it should.

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Filed Under: bankruptcy, blame game, false report, google news, information, news, stock market
Companies: bloomberg, google, income securities, sun-sentinel, united airlines

25 Comments

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Charles Pekow, 9 Sep 2008 @ 1:29pm

United Airlines
It would serve United Airlines right if it did go bankrupt. They are real cheaters. On my last flight with them, at checck in, the kiosk demanded I pay a baggage fee for a bag I didn't have. I asked at the gate for a refund. I was told to call customer service later because the data weren't in the system yet. When I called customer service (an oxymoron at United if there ever was one), I was told I should have gotten my refund at the gate. I subsequently provided documentation that I wasn not carrying the extra bag the airline charged me for. Despite the evidence, the company refuses to refund my money. Let them go bankrupt, I say!
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- ehrichweiss, 9 Sep 2008 @ 3:33pm
  
  Re: United Airlines
  I agree fully. 5 years ago was my first and last commercial airline flight EVER. I'd sooner drive to California and back than hop aboard another time and dollar sucking airplane.
  
  Want to know another way they cheat? They will claim to have the most on-time flights of any airline but what they fail to mention is that they don't count the flights they cancel, which then gets you booked onto another flight that they can THEN claim is on-time.
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eleete, 9 Sep 2008 @ 1:33pm

http://www.eleete.com
I know this is not entirely related. It is odd that I was thinking along similar lines just yesterday. Having Tivo and YouTube and Hulu and other sites moving to the forefront. I keep getting content that simply says 'Live'. Hurricane reports, convention news, little boy/girl goes missing. How bout a date and time to go along with that 'Live' logo. It can only be live for a split second, and then it must be archived. Date and Time would be ever so helpful for the remainder of time. Makes just perfect sense to me, whether it is video or article/text content. Just my $0.02.
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JB, 9 Sep 2008 @ 2:00pm

Better than Penny Stock Spam
Darn, should have bought at $3.

We'll have to try this again tomorrow.
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A. Nonymous, 9 Sep 2008 @ 2:08pm

Is the first line of this story irony?
The drop happened on Monday, not Tuesday.

In a bit of good news, the shares not only recovered to approx. $10, but any trades after a certain time may be annulled anyway.

The article itself had several clues in in (context) that made it very clear it was not 2008, but 2002. I'd say the fault lies with Bloomberg, who couldn't do basic checking before publishing a major story, about a major stock that would have a material affect on its price. I'm sorry, but putting the blame in any court save Bloomberg's is ridiculous.
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- PaulT (profile), 9 Sep 2008 @ 2:14pm
  
  Re: Is the first line of this story irony?
  "I'd say the fault lies with Bloomberg"
  
  Erm, you mean Income Securities - the Bloomberg reference was to a prior incident. But yeah, Income Securities are to blame for this - if they're publishing bad information based on a cursory, unverified Google search then they deserve whatever they get in terms of lost business.
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- PaulT (profile), 9 Sep 2008 @ 2:18pm
  
  Re: Is the first line of this story irony?
  Damn lack of an edit button... I mean that Bloomberg weren't responsible for the publishing of the information like they were in the previous incident. Sure, they could have checked Income Securities' information but Income Securities was responsible for the faulty data.
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- Mike (profile), 9 Sep 2008 @ 2:24pm
  
  Re: Is the first line of this story irony?
  The drop happened on Monday, not Tuesday.
  
  Typo. Fixed. :) Thanks.
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johnjac, 9 Sep 2008 @ 2:28pm

Same rules of investing
The same old rules of investing apply. High risk = High return or high losses. Low risk = Low return or low losses. If you invest based on new (thus risky) news, you could get burned badly, or be richly rewarded. If you wait for news to be vetted (thus less risky) your returns will similarly less risky.
No need for blame, the system worked.
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A. L. Flanagan, 9 Sep 2008 @ 2:37pm

Well, duh
I'd blame all the idiots who sold on one extremely fishy report. How did that pass the smell test? Can't these people read balance sheets?

And why did the "researcher" type that query in the first place? Is their whole research protocol "type stuff into Google and see what you get"?
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Michial, 9 Sep 2008 @ 3:10pm

Stock holders responsible
The responsibility lies totally on the buyer and seller, the first rule of investing is to verify your sources.
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Anonymous Coward, 9 Sep 2008 @ 3:23pm

who cares
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Anonymous Coward, 9 Sep 2008 @ 4:21pm

Follow the $$$
Who shorted the stock just prior ?
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Anonymous Coward, 9 Sep 2008 @ 6:09pm

In the following I use capitol letters for my statements and questions to differentiate them from the text taken from the article.

...............................

Apparently, a staffer at Income Securities Advisors Inc. did a search for "united bankruptcy 2008" on Google, and found an article on the Sun-Sentinel.

OK SO THIS INFORMATION CAME FROM THE SUN_SENTINEL WEB SITE.

As for Google, they are indeed guilty of publishing an inaccurate date, but as we've seen before, their usual recourse is to blame the site for the problem, and, that said, their terms of service clearly state that they are not liable for the accuracy of their data.

HOW IS INFORMATION FROM THE SUN-SENTINEL GOOGLE DATA?
WHAT MAKES IT GOOGLES RESPONSIBILITY TO CORRECT INFORMATION ON A NON GOOGLE WEB SITE?

IF YOU TRUST ANYTHING OTHER THAN THE WALL STREET JOURNAL AND BARONS, WELL YOU DESERVE A 75% LOSS.
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- Errant Garnish (profile), 10 Sep 2008 @ 5:34am
  
  Re:
  I think you are overlooking a few facts of the story.
  
  Google does differentiate between "news" and "the web" when performing searches. It also offers a service called "Google Alerts" where you can have alerts sent to you via email whenever a new link appears in a selected category (news or web). On Monday, people who had subscribed to Google news alerts about United Airlines received a "news" article saying that the company was filing for bankruptcy.
  
  I agree that Google is not liable for the error, but it does open itself up for criticism for tagging web pages as "news" that are neither new nor newsworthy.
  
  As for this comment "IF YOU TRUST ANYTHING OTHER THAN THE WALL STREET JOURNAL AND BARONS (sic), WELL YOU DESERVE A 75% LOSS," couldn't you have made the same statement about Bloomberg before Monday?
  
  EG
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Dan, 9 Sep 2008 @ 11:54pm

I love it! They are twitchier then a tweaker on Red Bull and just followed the rest of the herd of lemmings over the cliff. LOL So much for research.
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Anonymous Coward, 10 Sep 2008 @ 5:53am

Why . . .
Would anyone be holding this stock anyway? Hoping for a government bail out I suspect.
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Rich Gordon, 10 Sep 2008 @ 9:39am

How the UAL debacle all went down
This is an example of blame being shared all around -- among humans and among the algorithms humans wrote.

I reconstruct the timeline here, with some thoughts about what the real lessons are:

http://www.readership.org/blog/2008/09/how-old-news-moved-market-united.html

Rich Gordon
Medill School, Northwestern University
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Lisa O, 11 Dec 2008 @ 8:43pm

Every year in...
Every year in the United States, about 10 million households declare bankruptcy. A lot of people try to blame the payday loan industry, and cite that there are more payday loan stores than McDonalds or Starbucks. A lot of negative media coverage has been inflicted on the payday loan industry, especially since the industry has become so popular and prevalent. A good deal of media coverage likes to link the two things, claiming that getting payday loans causes bankruptcy. This isn't really good thinking, since it is relatively common knowledge that just because two things coincide, doesn't mean that they are linked. The Vanderbilt Law School's Assistant Professor Paige Marta Skiba found that applicants that were approved for payday loans were more likely to file for bankruptcy than those who didn't. Now, that isn't surprising – the people who applied for payday loans needed money! People who don't need money, don't apply. In other words, people who need money are more likely to declare bankruptcy. Anybody could have told us this. A payday loan is like any other debt – you take out the loan and you have to pay it back responsibly, and those people who borrow and spend irresponsibly are the ones who are the most likely to wind up with bankruptcy. It is unfair, and not really logical to blame payday loans for the rate of bankruptcy – instead of irresponsible financial planning.
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Lisa P, 12 Dec 2008 @ 1:55am

We live in a busy world where competition is tight that’s why we have to use our money responsibly and productively. Overspending is one of the reasons why there are people who are filing bankruptcy and some of them are resorting to payday loans to alleviate their financial needs. About ten million households declare bankruptcy each year. Through a study by Vanderbilt Law School, Assistant Professor Paige Marta Skiba claims applicants that were approved for payday loans were more likely to file bankruptcy than those who did not. It’s clear that those who were applying for the loans are applying because they need money. Since the need of emergency cash has increased dramatically, there has also been a lot of negative media claiming payday loans are the cause of many individuals filing for bankruptcy. It’s unfair to judge the payday loan industry in such an imperceptive way. Those who apply for payday loans are adults who have the ability to make responsible financial decisions. First and foremost, you must thoroughly read and understand the terms and conditions of a loan before engaging in it. The main point is that payday loans are not the reason for the cycle of debt that many have willingly thrown themselves into. It is unfair to blame the lender for an individual’s irresponsibility. Click here to learn more on Payday Loans.
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- united cash loans, 13 Nov 2009 @ 7:08am
  
  Re: United Airlines
  Good story Lisa. I work with cash loans carefully as you. May be we could contact offline to talk about this theme.
  Thank for the author of this article.
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bedroom furniture, 1 Apr 2009 @ 2:27am

This isn't really good thinking, since it is relatively common knowledge that just because two things coincide, doesn't mean that they are linked. The Vanderbilt Law School's Assistant Professor Paige Marta Skiba found that applicants that were approved for payday loans were more likely to file for bankruptcy than those who didn't. Now, that isn't surprising – the people who applied for payday loans needed money! People who don't need money, don't apply. In other words, people who need money are more likely to declare bankruptcy. Anybody could have told us this. A payday loan is like any other debt – you take out the loan and you have to pay
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club penguin, 4 Jun 2009 @ 10:11pm

Having Tivo and YouTube and Hulu and other sites moving to the forefront. I keep getting content that simply says 'Live'. Hurricane reports, convention news, little boy/girl goes missing. How bout a date and time to go along with that 'Live' logo. It can only be live for a split second, and then it must be archived. Date and Time would be ever so helpful for the remainder of time.
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Davie (profile), 7 Jul 2010 @ 2:30pm

When we talk about such big corporations, as United Airlines, the chance to casualty is dead small, almost unreal. I think, it wasn't that case. Of course, we can't deny the significancy of information in today's world. Today we can't imagine our lives without the Internet. Whatever you want to order, from kitchen-stuff to payday loans online, it's a question of few minutes. But even his majesty Internet isn't safe and reliable at times. Your acoount may be hacked, or there may happen some casualty. But when we talk about deals of such a scale as United Airlines...it's not all clear!
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skin moles, 7 Dec 2010 @ 3:35pm

Re: United Airlines Shares Plummet 75%...
Omg! A problem like this could worsen the status of their own company. This could bring disaster in the future.
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