Google News snafu leads to airline stock plunge

What was the unlikely culprit behind a 75 percent drop in United Airlines' stock on Monday? An erroneous Google News search, that's what.

The problem was that an investor news service, the South Florida-based Income Securities Advisors, found a Chicago Tribune article from 2002 via Google News and consequently included it in that day's news digest--which wound up on Bloomberg's news wire. The content of the story wasn't the sort you want to be publishing if it isn't true: that United Airlines had filed for bankruptcy. Considering the state of the airline industry today, it was by no means unbelievable, especially considering that United only emerged from bankruptcy in 2006.

By the time United put out a release denying the news, its stock had plummeted 75 percent from $12.30 on Friday to less than $3. It eventually climbed back up to $10.49; Chicago Tribune parent company Tribune Co. pulled the 6-year-old story from its online archives to avoid further confusion. But Nasdaq, which lists United Airline's stock (UAL), decided against rescinding trades that had happened as a result of the mishap.

Income Securities Advisors later said the story had turned up in a bankruptcy-related Google News search, with no time stamp attached. But different accounts of how it exactly happened upon the story don't fully add up.

The Tribune Co. effectively blamed Google's automated news search process, where headlines are filtered by bots and algorithms rather than by humans. The Chicago Tribune reported Tuesday that the six-year-old story "prominently popped up" in a news search, a position usually reserved for very recent news. The reason for its prominence, Google later explained, was that it had wound up on a list of most-read stories on the Web site of the Orlando Sun-Sentinel, another Tribune Co. newspaper. Increased traffic to the story, Google said, set off the bot--as did the fact that the day of the week that the original story was published was a Monday and hence lined up.

Bloomberg has admitted that it doesn't verify the accuracy of the news that comes over its financial data service through third-party partners. But, the Chicago Tribune reported after the fact, there's no evidence of malicious stock manipulation in this case.

Considering the lightning-speed nature of news on the Web, investors have had the occasional sobering reminder that online media isn't always accurate. Last year, a hoax memo published to a blog convinced many a securities professional that there would be delays in the release of the original iPhone, sending Apple's stock tumbling and leading to occasional whispers that someone may have been trying to manipulate the stock price. But the United Airlines situation is unique in that there was no hoax involved--the Tribune story was a real one, albeit old, and nobody appears to have been pulling a prank.

Late last month, Bloomberg accidentally sent the draft of a Steve Jobs obituary over the wire momentarily; luckily, it was pulled before incorrect reports of the Apple CEO's demise could have any effect on company stock.

This post was updated to clarify Income Security Advisors' relationship to Bloomberg, and expanded at 7:41 a.m. PT.

[mbenedict]

Welcome to yesterday.

[boychuk]

I wonder how many investors capitalized on this snafu, winning a big 300% return?

[jandler]

Sue them. That's what needs to be done. This is the kind of snafu or misinformation intentional or unintentional that destroy business and it must be stopped. Just look at Bear Stearns. Granted, they were in very bad shape but that didn't stop some people to orchestrate a faster and more profitable fall.

[jritten2]

No need to add "online" to "media isn't always accurate."

[jasonreneau]

This is another bump in the continuing evolution going on in the news industry. In our rush toward convenience and speed, journalistic integrity has been overlooked a bit. It will undoubtedly make a comeback at some point. I have also been pondering if the evolution will involve a new separation of fact services, from opinions on those facts, and distribution of the resulting stories. In this case, I agree with jandler that the news service should be sued. They repackaged the story without a date and replaced it with today's date thus making it a flase story. A company losing 75% of its value in a day is a tremendous amount of pain to the system. We need to start holding people accountable.

[justryan]

Your story is partially incorrect. It was the Fort Lauderdale Sun Sentinel, not the Orlando Sentinel. Different Tribune newspapers.

[renGek]

ok, they don't verify the accuracy of the story and they blame google ??
Nice blame shift there. Lets not take responsibility for anything.

[chash360]

This is yet another negative affect of todays stock market. It used to be that investors, and brokers were educated, savvy people who actually read quarterlies and financial statements, and would know that this was a mis-reported story. And then they would actually check their facts, you know, contact UA and confirm this if it seemed out of place. But now that every Tom, Dick and Harry, is out there trading, just looking to get rich, there is no stability in the market place. The volatility, is like a bunch of monkeys arguing over the price of tea in china....

There are no real investors anymore just greedy day traders. Your best bet, if you actually care about your business, find private venture capital, and never go public, becuase the public decides on a whim and changes directions almost instantaneously like a flock of birds, or a school of fish.

There is no reason to trust the media anyway, online or otherwise. Perhaps they should create longer purchasing, holding, and selling times for stocks so that it could not be so volatile? So you buy and sell based upon what you think its worth, not what you speculate the price will be in the next hour.

[ryoon816]

This is a hedge fund realizing a flaw in the automated system. They generated enough traffic on a small news outlet to create a link to the United Airlines story from 2006. Google's automation set up a new search in new news. Then everyone else picked it up, and the rest is history. Millions of dollars exchanged hands, some one became even richer. This will likely be nearly impossible to track who or what hedge fund did this, but I would expect to see it again with in the next few years. It will be forgotten as some random event that wouldn't ever happen again.