Old story on United's 2002 bankruptcy resurfaces, causes stock to crash
Chicago-based UAL Corp., parent of struggling United Airlines, is mulling its options against the Tribune Co. after an old story about its 2002 bankruptcy resurfaced with Monday's date, causing a chain reaction that forced the airline's stock to temporarily free fall.
A preliminary investigation by the Tribune said the story, written in December 2002, was picked up by an investment advisory and research firm that "republished it as though it was current. The story was in the archive section of the Web site of the Sun-Sentinel in South Florida," Tribune spokesman Gary Weitman said in a statement.
"The story contains information that would clearly lead a reader to the conclusion that it was related to events in 2002," Weitman said. "In addition, the comments posted along with the story are dated 2002. To be clear, no story appeared (Monday) or over the weekend on the Sun-Sentinel Web site or any Tribune Web site regarding United Airlines' filing for bankruptcy."
However, Income Securities Advisor in Miami Lakes, Fla., an investment research firm, said it saw the article during an Internet search, found it on the Sun-Sentinel Web site on Monday and posted it to Bloomberg Professional, a news distribution service for subscribers.
Richard Lehmann, president of Income Securities Advisor, said he had a copy of the Sun-Sentinel Web site story about United, which did not indicate anywhere that it was from 2002.
"We've been doing this for 10 years, and nothing like this has ever happened," said Lehmann.
Users of Bloomberg Professional can access news and information from many other sources, including Web sites and news services. This item was posted by the news service that is available by subscription and visible on the Bloomberg Professional service, said Bloomberg spokeswoman Judith Czelusniak.
The old news, posted with the current date, led UAL shares to dive about 70 percent to $3.
Nasdaq halted trading at 10:06 a.m. and resumed trading at 11:30 a.m., Chicago time, said Nasdaq spokesman Wayne Lee.
"Nasdaq requires companies to notify us when the company is preparing to disseminate news of a material nature. We then halt trading until the news is released, which we did," said Lee.
Shares for UAL then closed for the day at $10.92, down $1.38, or about 11 percent.
"It was totally irresponsible to run such a story," said United spokeswoman Megan McCarthy.
United, which exited bankruptcy in February 2006, demanded a retraction.
When such mistakes are picked up by other sources, companies that are on shaky ground, like United, could be in danger, said Mike Boyd, aviation analyst and principal of The Boyd Group in Evergreen, Colo.
"The mattress is a better place to put your money than investments based on the advice of some of these firms," said Boyd.