2002's News, Yesterday's Sell-Off

By Frank Ahrens
Washington Post Staff Writer
Tuesday, September 9, 2008

A six-year-old article mistakenly seen by Bloomberg financial news users yesterday reported the bankruptcy of United Airlines and triggered a massive sell-off that nearly obliterated the company's stock in a matter of minutes.

The light-speed wipeout is a powerful reminder of how quickly bad information can spread via the Internet to a trigger-happy Wall Street that is willing to dump millions in stock before checking the facts.

It exposed how Bloomberg's influential brand name is vulnerable to bogus content -- the old article was posted to a Bloomberg subscription service by a Florida investment adviser, one of Bloomberg's many "third-party content-providers." Moments later, it popped up under United Airlines company news as a headline only: "United Airlines files for Ch. 11 to cut costs."

And it showed how the imperfect technologies of Internet search combined with human failure can cause ruinous results.

United parent company UAL opened trading on the Nasdaq Stock Market yesterday at $12.17 per share. The 2002 bankruptcy article appeared on Bloomberg monitors on Wall Street just before 11 a.m. In the minutes that followed, some 15 million shares of UAL traded and the stock plunged to $3 per share. Trading was halted at 11:30 a.m. for an hour. The stock closed down $1.38 at $10.92 yesterday.

United said it is unsure whether the incident will cause the already-shaky airline material damage.

At United's Chicago headquarters yesterday morning, the airline's financial services division watched in horror as the stock plummeted, while its shocked media relations department was besieged by reporters asking why the firm had declared a surprise bankruptcy, only six years after its last one.

UAL filed for bankruptcy protection in 2002 and emerged in 2006.

The bizarre chain of events began yesterday, when a reporter at Income Securities Advisors -- a Miami area investment service that disseminates news about distressed companies -- typed in a Google search: "bankruptcy 2008."

Up popped the six-year-old article from the South Florida Sun-Sentinel, which originally appeared in the Chicago Tribune on Dec. 10, 2002, the day after United declared bankruptcy. Tribune Co. owns the Tribune and the Sun-Sentinel.

Why did Google find a six-year-old article?

Largely because it was undated in the Sun-Sentinel Web archive. The Google Web crawler assigned the article the date it was found -- Sept. 6, 2008. The reporter from Income Securities Advisors saw the Saturday date and assumed it was a new article.

After that, Tribune and Google disagree.

Last night, Tribune Co. provided a screen shot showing the 2002 story on Google News with a Saturday, Sept. 6, 2008, date. Tribune spokesman Gary Weitman said the Google crawler somehow pulled the old, undated story from the Sun-Sentinel online archive at 10:36 p.m. Pacific time on Saturday.

Google blogged about the incident on the Google News Blog late last night, confirming it had found the article at 10:36 p.m. Saturday. But Google said the article had appeared on its own since its crawler last visited the newspaper site, at 10:17 p.m. Regardless of how the 2002 article got on Google News, the increased traffic resulting from its presence there may have caused it to pop up when the reporter from Income Securities Advisors typed in "bankruptcy 2008."

In the mind of the reporter, Wall Street would want to know about a major airline declaring bankruptcy. The reporter posted the story to the Bloomberg Professional service at 10:53 a.m. yesterday.

Six minutes later, Bloomberg posted a news article headlined: "UAL Shares drop 33% at 10:58 a.m."

At 11:16 a.m., Bloomberg posted a correction in several languages, highlighted in red on the company's proprietary monitors: "UAL SAYS IT HASN'T FILED FOR CHAPTER 11."

"It shows the market apparently reacts to a headline as much as anything else," said Richard Lehmann, president of Income Securities Advisors.

Lehmann said yesterday's mistake was the first at his firm in 10 years. He was reluctant to heavily criticize his reporter, but said, "It would have been nice if the reporter had been more grounded in what's going on out there in the world."

"The fact that this happened with a major corporation like United based on one headline coming across Bloomberg, that you'd get this kind of knee-jerk reaction, there's something wrong with the trading mechanism," Lehmann said.

Income Securities Advisors is one of many "third-party" contributors to Bloomberg Professional, a subscription service used by Wall Street traders.

The Bloomberg Professional service is an Intranet limited to subscribers, who see news stories and financial information provided by Bloomberg employees, as well as content from third-party contributors, such as the six-year-old story mistakenly posted by Income Securities Advisors.

"The closest analogy would be a television network's content being carried by a cable carrier," Bloomberg spokeswoman Judith Czelusniak wrote in an e-mail yesterday.

Bloomberg had no further comment on yesterday's incident, she said.

Lehmann said he started getting phone calls shortly after his company posted the story from the Sun-Sentinel. Once he realized what had happened, he moved quickly -- he called Bloomberg and had the six-year-old story removed at 11:08 a.m. About 20 minutes later, Nasdaq halted trading.

In a statement, Nasdaq said all trades during the chaotic period from 10:55 -- two minutes after the story was posted -- to 11:08 would stand and had no further comment.

United said it is launching an investigation.

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