TRADING on the American market on August 25 will be remembered for one thing – the power of information.
Emulex is a network equipment manufacturer whose stock was trading on the day at $113.06.
A bogus Internet news release indicated that the California-based company was restating it’s earning, that its CEO had quit and that it was under investigation from the Securities and Exchange Commission.
Financial news agencies picked up the story and circulated it. The stock plummeted to $43 per share. Trading in the stock was halted around midmorning and the company went into damage control.
After conducting a number of interviews and reassuring its investors, the company was able to get the stock to recover the lost ground and closed Friday’s trade at $105.75, down $7.31 from its previous close.
The situation highlights the role of information in today’s high tech market when decisions about the future of companies can be decided on the basis of information obtained from wire services and the like.
The Internet has insufficient controls on it relating to the accuracy of information.
What is placed on websites and chat rooms and similar public domain areas is not checked for accuracy or for authority. There is little regard about how the information is used and even less attention is paid to the impact of that information on share prices.
The Emulex example is just one of a number of similar issues. Authorities must to do something to address this very worrying aspect of today’s communication technology.
