United Airlines Glenn Tilton, Morgan Stanley’s John Mack, and Apple Computer’s Steve Jobs have in recent weeks had to work to squelch rumors spreading like germs on the Internet.
Once merely the scourge of microcap companies, Financial Week reports, the online rumor mill is now wreaking havoc on the stocks of larger companies and creating new problems for investor relations professionals.
In recent weeks, FW reports, Internet gossip seemed to be behind separate, sudden stock drops at Apple, Morgan Stanley and the holding company for United Airlines. “Rumors are like tire spikes for a company,” said Maureen Wolff-Reid, president of consulting firm Sharon Merrill Associates. “They can deflate a stock before the IR department has time to react, and sometimes even before a company realizes a rumor is behind the sudden slide in the price.”
As a result, IR heads, already reeling from the worst economic crisis in years, are scrambling to devise new ways to head off potentially damaging rumors—from contacting key shareholders to regularly monitoring message boards and blogs.
Morgan Stanley last Tuesday suffered a nearly 25 percent one-day stock price drop after rumors circulated on the Web that its proposed deal with Mitsubishi UFJ had gone south. A Morgan Stanley spokesman told FW business reporters started calling the company at 1 p.m., and the stock began plunging 20 minutes later.
Apple was hit earlier this month, when someone posted an item on CNN’s citizen journalism website claiming the computer company’s chief, Steve Jobs, was being admitted to an emergency room after a heart attack.Bogus, of course, but damaging: Apple’s stock dropped about 9 percent in minutes.
A spokeswoman for CNN said the Securities and Exchange Commission is now investigating whether “johntw” posted the rumor as part of a market manipulation scheme.
Last month, an old story about UAL Corp. filing bankruptcy in 2002 was reposted on a small Florida newspaper’s website and then linked to by Google Finance and Bloomberg. The story sent the company’s stock sliding as low as a penny before it recovered, and United is now considering possible litigation against the news outlets. Nasdaq was even forced to suspend trading in the stock for about 90 minutes.
“In the 15 years I’ve been doing this, I’ve never seen anything like it,” said Beth Saunders, chairman of FD Ashton Partners.