Internet Wire, the news dissemination service, and Bloomberg LP,
a financial news and information company, are being sued in a New
York court by an investor for their involvement in a recent hoax
press release that caused a 60% drop in the share price of
technology firm Emulex.
Shares fell by over 60% when a press release appeared on the
Internet Wire news dissemination service that claimed the company’s
chief executive was resigning, that the company would restate its
fourth quarter earnings, and that Emulex was under investigation by
the Securities and Exchange Commission. The release was picked up
by and displayed on other on-line news services, including
Bloomberg.com. Trading in the company was stopped by Nasdaq when
the hoax became apparent. When trading resumed, the stock rapidly
recovered. A college student who used to work for Internet Wire has
since been arrested on suspicion of perpetrating the hoax.
The law suit accuses Bloomberg and Internet Wire of “recklessly
disseminating materially false and misleading information."
Investor Ron Hart is alleged to have lost up to $15,000 as a result
of the hoax, having sold his 500 Emulex shares as they dropped
dramatically in value. Mr Hart is applying for class action status,
seeking “to recover damages on behalf of all investors who sold
Emulex stock or call options or purchased put options on August 25,
2000 before the resumption of trading,” said his lawyers.
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