UAL shares walloped by new posting of old news
CHICAGO (Reuters) - A nearly 6-year-old news story on the 2002 bankruptcy filing of UAL Corp (UAUA.O) resurfaced on the Internet on Monday, clobbering the airline's shares briefly as some traders mistook the report as current and plausible news.
UAL, parent of United Airlines, and several news organizations involved were blindsided by the resurrection of the Chicago Tribune article. UAL, which exited bankruptcy more than two years ago, demanded a retraction by the Florida Sun-Sentinel, where the out-of-date report first appeared.
UAL shares fell 76 percent to $3 after the article was posted on the Bloomberg financial news service. The magnitude of the decline may underscore the lack of confidence investors have in UAL and the troubled airline industry in general.
"A part of the reason why investors reacted so dramatically is because the airlines are on shaky financial footing," said Jim Corridore, equity analyst at Standard & Poor's.
He said stock in any company would have fallen on such a report, but not as much as UAL shares fell.
"I don't think we would see nearly the level we saw," Corridore said.
The airline industry has been battered severely by soaring fuel prices that have undone much of the progress airlines made during an industry-wide restructuring.
UAL, US Airways Group Inc (LCC.N), Delta Air Lines Inc (DAL.N) and Northwest Airlines Corp NWA.N have each reorganized in Chapter 11. But persistently high fuel prices have eroded airline earnings, and earlier this year, analysts began looking at the liquidity positions of airlines for signs of potential insolvency.
"United continues to execute its previously announced business plan to successfully navigate through an environment marked by volatile fuel prices and continues to have strong liquidity," the company said in a statement.
Trade in UAL shares were halted on Nasdaq after the false report hammered shares. The stock rebounded somewhat when trading resumed, but shares were down 9.8 percent at $11.09 in late afternoon trade, compared with the Amex airline index.XAL, which was down 1.7 percent.
CAUSE OF INCIDENT UNKNOWN
The Sun-Sentinel did not explain how the article, first published on December 10, 2002, appeared on its site. Tribune Co, which owns both the Sun-Sentinel and the Chicago Tribune, acknowledged that the story was not current and said only that it was "looking into the situation."
The article has been removed from the Sun-Sentinel website. It was unclear how long the story was on the Sun-Sentinel site.
Joe Schwerdt, who runs the Sun-Sentinel's website, told the Chicago Tribune that company records show that no one at the paper had opened the story file since 2003 and that no one outside the paper had access to the file.
The article hit shares only after it reached a much wider audience later in the day, when a staffer for investment advisory firm Income Securities Advisors posted it to Bloomberg.
Richard Lehmann, president of Income Securities Advisors, said the company employs reporters to comb the Internet for investment news. The reporters post their findings to Bloomberg.
The staffer on Monday typed the search terms "bankruptcy" and "2008" into the Google Inc (GOOG.O) search engine, which revealed the Tribune story on the Sun-Sentinel site.
"It's very suspicious," Lehmann said, referring to the appearance of the article on Google's news findings. He said his employee followed normal procedures and Income Securities Advisors has no shares in UAL.
"We have no economic interest in United Airlines," he said.
A Bloomberg spokesperson said that since the story was not written by Bloomberg, it was not edited by Bloomberg editors.
(Reporting by Kyle Peterson and Robert MacMillan; Editing by Lisa Von Ahn and Gerald E. McCormick)
