Old story tanks United Airline stock

September 8, 2008 5:06:02 PM PDT
The 2002 bankruptcy of United Airlines parent company was big news at the time, and big news again on Monday when an investment newsletter mistakenly passed along an old news story about the Chapter 11 filing, thinking it was new. United shares tanked before trading was halted and then recovered only a portion of that before ending the day down by a larger percentage than other airline stocks.

The trouble started with a Google search.

A staffer at investment newsletter Income Securities Advisors Inc. in Miami Lakes, Fla., entered the words "bankruptcy" and "2008" in the Internet search engine, according to President Richard Lehmann. ISA does this all the time, searching for overlooked information about companies in trouble, he said.

Lehmann said the top item returned in the Google search was a story about United's bankruptcy filing that appeared on the South Florida Sun Sentinel Web site. The story referred to United's filing on Monday morning. United had filed for Chapter 11 protection on Monday, Dec. 9, 2002. Lehmann said that date was not on the story.

At 10:43 a.m. the staffer posted a summary of the story from the Sun Sentinel site on the financial information service Bloomberg, Lehmann said. Bloomberg has its own journalists but also distributes information from third-party providers such as ISA, for which some subscribers pay extra. Lehmann said all Bloomberg users would have been able to see the headline, though.

After trading around $12 a share Monday morning, theited Airlines' filing for bankruptcy."

United quickly denied the bankruptcy rumor categorically on Monday morning, and issued a statement saying, "The story was related to United's 2002 bankruptcy filing, and United has demanded a retraction from the Sun Sentinel and is launching an investigation."

Asked whether United had made a mistake in blaming the Sun Sentinel, United spokeswoman Robin Urbanski said the company stands behind its statement.

Trading in shares of Chicago-based UAL Corp. resumed at 12:30 p.m. EDT. They closed at $10.92, down $1.38, or 11.2 percent, from their close on Friday.

A single trade for one penny on the CBOE Stock Exchange was later reversed. Nasdaq said the trades made during the 13 minutes when the shares were falling in earnest would stand, and that the decision could not be appealed.

United emerged from bankruptcy protection in early 2006. Like other airlines, it has struggled with rising fuel prices, and its finances have been shaky, although there has been no suggestion that another bankruptcy filing is imminent.