A blog article knocks $4 billion off Apple Market Cap

Wed, May 16, 2007

A supposedly false-alarm that Apple’s Leopard (their next OS) and their much-talked-gadget-phone iPhone being delayed, caused their stock to nose-dive knocking over $4 billion off their Market Cap. This is indeed a phenomenal development in the Blogosphere - a blog article can have that fundamental effect in the real work and real money.

Let’s zip into a simulation scenario drill in future;

A coveted and dedicated team of hackers hacks into some of these famous blogs - TechCrunch, GigaOM, Engadget, Boing Boing, etc. and took them for just 24 hours (may be even less should do). An organized blog article with striking difference but similar topic is posted across these blogs. Eventually, many diligent Digg, Netscape and Reddit users plasters them all over the heavily trafficked social sites. It then hits the front pages in record time (it will for such stories)! As soon as that happens, it is picked up across other blogs and is blazing hot across the blogosphere.

Even before it hits Digg’s Popular Upcoming Section, the news would have hit the Silicon Valley and other tech-sphere across the globe, it will hit thousands if not millions of blackberries, emails and IMs. Business institutes and other investors does a frantic sell-off, some will hesitate to buy and the price plummets to a formidable negative figure of the Company’s Stock in concern.

By the time, the hacked sites are taken controlled over from the hackers and normalcy restored, error, corrigendum issued; the damage is so well done that the Company’s Stock is in loss of billions of Market Dollar.

What if the hacking was organized by somebody or a team that just sold off millions worth of stock just few hours before the hack? Or what if the next rival Company’s people is involved? If may be remembered that the blog articles in the hack managed to mentioned something about the rival company that send their stock sky-rocking upwards! Alright, remember Le Chiffre’s plan to blow up that newly launched Sky Liner to make profits off the Stock Crash but he ends up loosing it himself - Casino Royale.

Back to Reality;

Early morning yesterday (US Time) around 11:49 AM EST Engadget posted an article claiming that the Apple’s iPhone and Leopard OS launches would be seriously delayed. They based the story on an internal Apple email that was forwarded to them.

Minutes after that article hits the Blogosphere, Apple’s stock started to see a massive selling, from $107.89 to $103.42 within 6 minutes. This knocks off a whooping $4 billion of Apple’s Market Cap. Of course, a lot of people lost a lot of money very quickly. Luckily, it turns out that the email was a hoax. Engadget updated their article to reflect the error. Again within hours, Apple stock recovered slowly but the damage was already done - it ended the day down just $1.40/share, or $1.25 billion in market cap.

UPDATES

2007 18th May

Paul Kedrosky feel that this is a bigger deal than a blog getting a story wrong. Because this was almost certainly done for market manipulation, with someone, Russian hackers again?), inserting this into the Apple network, knowing it would get out and hook someone, while allowing them to trade against the news.
The Inquirer says Apple only has itself to blame for $4billion stock loss. But the mainstream media, such as Information Weak has been laying it on a bit too thick with quotes like “Journalism 101 says you should have confirmed the story with Apple first.” Clearly Information Weak has never tried to get a quote from Jobs’ Mob, particularly when it is a real story rather than some nonsense about how the Ipod can cancer.
Engadget clarifies their stand on the Apple Product delay episode. We have learned a very serious lesson yesterday. We will work very hard to earn back the trust we have lost and to do our best to be what we have always strived to be: a trustworthy source for the latest on gadgets, consumer electronics, and personal technology.