Blog cost Apple $4B, for a little while

May 16, 2007 11:35 PM

Engadget briefly cost Apple $4 billion today when they posted a fake email about the iPhone being delayed, causing Apple's stock to plunge. While competing gadget blog Gizmodo avoids gloating, there is evidence that some investors made a lot of money from the mistake. Are we seeing the early days of sophisticated stock hacking on the web, as has (incorrectly) been alleged before? Certainly the old pump-and-dump methods are no longer working like they did.
posted by blahblahblah (46 comments total)

Are we seeing the early days of sophisticated stock hacking on the web...

Yes.

I would imagine Engadget thought they were just scooping but somebody out there orchestrated it.
posted by well_balanced at 11:45 PM on May 16, 2007 [1 favorite]

I wonder if someone will make a comment about whether blogs can be trusted to carry the torch of "New Media" when their reporting of news consists of posting any juicy email they might come across without fact checking or confirming the contents with the original source.

I wonder.
posted by Jimbob at 11:49 PM on May 16, 2007 [2 favorites]

It's a clear sign of the "Pull the Trigger" midset and go-go-go '90s day-trader idiocy has returned as the Dow creeps ever upward. It is very, very, very tough to beat the market, and people who clearly aren't talented enough to do it using fundamental and technical analysis are looking for an "edge."

This is the modern-day equivalent of getting stock tips from the shoe-shine boy. A gadget blog is NOT a good place to get news that will influence your investment strategy. Engadget is not Blomberg. It is not the Wall Street Journal. It's not even that loud guy with too many gadgets on his belt on CNBC who brags about how crazy he is. It's where you go for snarky remarks on cool iPod accessories. Investors who cannot figure this out get what they deserve.
posted by Slap*Happy at 12:00 AM on May 17, 2007 [1 favorite]

[GOOG]
posted by acro at 12:04 AM on May 17, 2007 [1 favorite]

I wonder where they got the idea? Youtube took it down but Kramer went on at length specifically about spreading false rumours about the iPhone.
posted by well_balanced at 12:05 AM on May 17, 2007

Are we seeing the early days of sophisticated stock hacking on the web...

I don't think it's sophisticated at all. Anyone who knows anything about the stock market will understand that this kind of thing has been happening since the very beginning. I daresay it's happened on the internet thousands of times and in other channels millions of times.

I'd suggest anyone who thinks this sophisticated (OMG, it's on the internet so it must be new and clever!!! OMG it's Apple too!! OMG OMG) lacks financial sophistication themselves.
posted by rhymer at 1:11 AM on May 17, 2007

there is evidence that some investors made a lot of money from the mistake

They have to be able to pay for the iPhone somehow.
posted by srboisvert at 1:31 AM on May 17, 2007 [1 favorite]

Rhymer, it could be considered sophisticated given that this specific event involved somehow accessing Apple's internal network and sending the email from there to Apple employees... betting that one of them would leak it as a "credible source". It's not just posting some shit on a stocktrading newsgroup.

So don't be needlessly rude to the person posting.
posted by Spacelegoman at 1:32 AM on May 17, 2007

Because of course no-one has ever faked a leak from within a company before....
posted by rhymer at 1:36 AM on May 17, 2007

If anyone made a lot of money on this, the SEC will probably get them, at least the big fish. They are pretty good, maybe our most efficient govt agency.
posted by banishedimmortal at 1:49 AM on May 17, 2007

Well, either way (tsk tsk), interesting, and the trail well laid out here. Ta, bbb.
posted by imperium at 1:50 AM on May 17, 2007

When you consider the trouble that some newspapers have had with their ability to move stocks (see Piers Morgan), it was always inevitable that blogs were going to run into trouble with this sooner or later. If your blog is big enough and well-read enough to interfere with the stock market, your reporting suddenly takes on quite a severe legal responsibility beyond "omg someone just emailed me that Apple's going bankrupt!!!!11"
posted by reklaw at 3:50 AM on May 17, 2007

"Accessing Apple's internal network" was probably much, much easier than one might think. Evil Haxx0r cadre? Nah, that's just silly. Messing about on closed corporate intranets is surprisingly easy for a motivated, creative saboteur these days.
posted by turing_test at 3:56 AM on May 17, 2007

So you sent out false bad news, stock price tumbles, you snatch as much as you can, then send a retraction? Digg!
posted by furtive at 4:03 AM on May 17, 2007

Mike Cramer discussed this trick. Probably some corrupt hedge funds were responsible.
posted by bhouston at 4:07 AM on May 17, 2007

That's pretty insane. I wonder if it's one of the more successful of these sort of schemes.
posted by chunking express at 4:10 AM on May 17, 2007

corrupt hedge funds

Fixed that redundancy for you.
posted by Lentrohamsanin at 4:54 AM on May 17, 2007

My favorite ever was back in 1999 - Redhat floating a rumor of buying BeOS that sent their stock soaring for about 12 hours. I know a few friends who cashed in on that one. Ah the bubble days...
posted by tatnasty at 4:54 AM on May 17, 2007

Are we seeing the early days of sophisticated stock hacking on the web...

Early days? Hasn't internet pump and dump (or in this case, short and deflate) crap been going on since Usenet?
posted by delmoi at 5:04 AM on May 17, 2007

I wonder if someone will make a comment about whether blogs can be trusted to carry the torch of "New Media" when their reporting of news consists of posting any juicy email they might come across without fact checking or confirming the contents with the original source.

Well, I hope you're not asking because you think they should, since anyone can start a blog, there is no intrinsic trust. You have to pick and chose sources you think are legitimate, and ignore the ones you don't.
posted by delmoi at 5:08 AM on May 17, 2007

If anyone made a lot of money on this, the SEC will probably get them, at least the big fish. They are pretty good, maybe our most efficient govt agency.

Maybe not.
posted by Blazecock Pileon at 5:28 AM on May 17, 2007

The real question here is: when will Metafilter go public, with an attractive share offer that would raise millions, if not billions, in much needed capital?

As a fee-paying member of this site, I yearn to exercise my securitization options and pocket a tidy sum from someone's else's internet smarts. I also think about the wonderful innovations Matt could implement with new investment monies: MetaNews, MetaMaps, MetaMail, MetaBlogs ... why should companies like Googhoo or Yagle have all the fun?

It's time we all had a fiscal environment which would encourage us to think "outside the box" and "push the envelope" and "interface with the cutting edge of the virtual innovation sphere," and shit like that.
posted by the quidnunc kid at 5:30 AM on May 17, 2007 [2 favorites]

The SEC and Enron aside, does anyone know if Engadget (or any blog in general) can be held liable for damages from posting unsubstantiated rumors as fact?
posted by Blazecock Pileon at 5:30 AM on May 17, 2007

Good newsfilter post, great links.
posted by fungible at 5:54 AM on May 17, 2007

Sophisticated internet stock hackers: get over yourselves. You might think this is somehow cooler, snarkier, hipper, or laser-like insightful, but it's snot.
posted by wallstreet1929 at 6:04 AM on May 17, 2007

Jimbob wrote:

I wonder if someone will make a comment about whether blogs can be trusted to carry the torch of "New Media"

When new media gets played Apple's stock price temporarily dips but when old media gets played 100's of thousands of innocent people die.
posted by any major dude at 6:11 AM on May 17, 2007

Are we seeing the early days of sophisticated stock hacking on the web...

No. See PairGain, circa 1999.
posted by cribcage at 6:28 AM on May 17, 2007

I wouldn't put too much "stock" in stories about how 5 million shares got dumped. Any trader with half a brain would put a stop loss order on a momentum stock like apple, so if it dropped by a certain amount (or hits a certain price) they'd automatically sell. Based on the chart, I'm guessing there were a lot of orders sitting out there at 107.

Of course, as momentum stocks push higher, the risk of a big drop increases, so more and more people have stop loss orders. When something like this hits the wires, as some people start selling, the orders get triggered, there is more selling, etc. To balance this of course, there are people out there with buy orders to pick up stocks after they fall a few points, on the assumption of a rebound.

To me actually, the weird behavior is Tuesday, when the stock hit 110 and then crumbled on apparently no news.

You can see from the chart that it was very likely that you had orders out there at 110 and 107, so if the stock went as high as 110, sell (take some profits) but if it dropped as low as 107, dump (bail out before death).
posted by Pastabagel at 6:52 AM on May 17, 2007 [1 favorite]

Blue Horseshoe loves Anacott Steel.
posted by fet at 6:59 AM on May 17, 2007 [2 favorites]

Doing this on a blog instead of a forum makes it sophisticated?

No, it just makes it work all the better. No one believes forum spam, and precious few people read it. The Engadget post worked, to the tune of a 3% shift. I'm not so optimistic that anyone will be caught. Who knows, it could have even been an honest mistake.

Has anyone been busted for email spam stock pumping?
posted by Nelson at 7:29 AM on May 17, 2007

BREAKING: A confidential email has been circulated indicating that, in an effort to improve their "Do No Evil" image, Google has decided to shift focus from their search technologies to investigate the potential of "hugging" to help address world peace.

What effect this will have on their explosive growth in the technology sector is ultimately unknown, but early indications seem to show a sharp decline in their stock price. In a bizarre twist, stock values in popular perfume and cologne manufacturers have shown a steep increase since this report began circulating.
posted by purephase at 7:31 AM on May 17, 2007

See! You really can hack an apple. Granted this was a rather remarkable feat of social engineering, but still.
posted by malaprohibita at 8:36 AM on May 17, 2007

I also think about the wonderful innovations Matt could implement with new investment monies: MetaNews, MetaMaps, MetaMail, MetaBlogs

I assume users under 20k qualify for the IPO?
posted by Ynoxas at 8:37 AM on May 17, 2007

The SEC and Enron aside, does anyone know if Engadget (or any blog in general) can be held liable for damages from posting unsubstantiated rumors as fact?

I seriously doubt it. And why would they? It's not like apple actually lost any money, the stock went down, and then it went back up. Some people lost money and others gained it.
posted by delmoi at 9:00 AM on May 17, 2007

Has anyone been busted for email spam stock pumping?

Interestingly one of the MyDD founder, Jerome Armstrong got busted pumping a stock via sock puppets.
posted by delmoi at 9:04 AM on May 17, 2007

"Who knows, it could have even been an honest mistake."

It wasn't an honest mistake, and it wasn't a "sophisticated infiltration of Apple's internal network" either.

That's all I can tell you right now.
posted by drstein at 10:10 AM on May 17, 2007

fet, I hope Fox Movie Channel runs that again soon.
posted by SentientAI at 10:34 AM on May 17, 2007

From Gizmodo: People lost a lot of money, because of something they read that was wrong.

No, people lost money because they reacted poorly to information that they had not verified was correct.

I can't feel sorry for anyone who loses money on the stock market because they are freaking out over unsupported rumors.
posted by quin at 10:40 AM on May 17, 2007

quin pretty much nailed it: if you played the stock market the way you should, you wouldn't have bailed your position, since you'd be playing for the long haul. You'd have idly watched as the rumor was corrected and the stock price returned to form, all in the same day.
posted by hincandenza at 11:12 AM on May 17, 2007

To me actually, the weird behavior is Tuesday, when the stock hit 110 and then crumbled on apparently no news.

I would go a step further and say that the drop has absolutely nothing to do (or very little to do) with the fake iPhone news.

I was under the impression that trading like this takes place on the derivatives market now, due to the ability to get a larger expected payoff for your initial input. It'd be interesting to see how options prices changed during the news, and the amount traded.
posted by geoff. at 11:30 AM on May 17, 2007

I was under the impression that trading like this takes place on the derivatives market now, due to the ability to get a larger expected payoff for your initial input. It'd be interesting to see how options prices changed during the news, and the amount traded.
posted by geoff. at 2:30 PM on May 17

I still think there are substantial holdings by hedge funds and momentum traders that use stock, but the options action would be interesting to see.
posted by Pastabagel at 12:52 PM on May 17, 2007

Blue Horseshoe loves Anacott Steel.

Anacott Steel? WTF! You're supposed to be pushing Webistics!
*flings scalding coffee*
posted by kid ichorous at 1:42 PM on May 17, 2007 [1 favorite]

Stock pumping on the Internet has a long and proud tradition, most notably at the Yahoo! Finance message boards. In fact, about a year ago Yahoo! shut down the stock-related message boards because the pumping-and-dumping, as well as the abusive language, got so out of control. Yahoo! has since revamped the boards, but they are still full of trolls. Around 2003, XM radio and Sirius rumors were floated on a daily basis ("Toyota going with XM! Toyota going with Sirius!") and I did see some activity associated with those rumors- whether these rumors have ever had any effect on the stock price is questionable. Satellite radio investing at that point was wildly speculative anyway.

Investors have been sued for pumping-and-dumping on the Yahoo! Finance message boards.

Contrary to what an above poster said about blogs not qualifying as "real" media, I think this event only goes to show just how much investors in 2007 do get their "news" from blogs and message boards, and that consumer-generated media is as highly respected, in terms of its impact on consumer and investor behavior, as traditional media. Whether this is a good thing or a bad thing is debatable; whether or not it is happening is not.
posted by Sidthecat at 6:56 PM on May 17, 2007

Certainly the old pump-and-dump methods are no longer working like they did.

I think The Register should stick to IT and stay away from subjects where they are ill-informed:

The Securities and Exchange Commission says spam campaigns promoting Goldmark and 34 other stocks that the agency recently suspended from trading for ten days robbed investors of tens of millions of dollars. And those 35 are just a few acres of the swamp. The SEC estimates that 100 million stock-spam messages are sent daily. Postini, an e-mail-security company, says the volume of spam that hypes stocks has grown 120% in the past six months, and that about one-fifth of all spam is stock-related. (On April 13, the SEC suspended trading on three more penny stocks that it suspected were being manipulated through spam campaigns.)

posted by pmurray63 at 10:06 PM on May 17, 2007

Engadget Response
posted by chunking express at 7:33 AM on May 18, 2007

I can tell you one thing.. Engadget is reeeeeeally reaching, and got egg on their face. They're right, though, it did exist, did get out, and someone that doesn't know how to read email headers got all excited and forwarded it offsite, ignoring the warning at the bottom of the email.
posted by drstein at 10:52 AM on May 18, 2007