Web gaffe sends United stock spinning

It's an old story but I'll say it again: Be careful what you read on the Internet.

Yesterday, the already beleaguered stock of United Airlines (Nasdaq:UAUA) took a ride for the ages. After a story was promoted by a stock advisory service (having been indexed by Google with yesterday's date) indicating that the company was declaring bankruptcy, the stock plummeted from about $12 a share to $3.72 in minutes, knocking about $1 billion in market value from the $1.4 billion value of the company.

The problem: United wasn't declaring bankruptcy. The story was actually taken from an old copy of the South Florida Sun Sentinel. This undated (or misdated) story about United's 2002 bankruptcy was added to the advisory service's news feed, which then was sent to a Bloomberg news wire service and from there on to Google News, where it became a top story for the morning. Though the story is said to clearly note the actual date of the bankruptcy in question in the main body of the text (good luck trying to find the original now), the headline did not (nor would one expect it to). Since then, UAUA has recovered most, but not all, of the lost value. Trades made during the 15 minutes before they were halted will stand.

It's amazing how a tiny error, reportedly caused by a single person who didn't read the story carefully before sending it on to a wire service, can snowball into such a devastating problem. At least three times the story was promoted along the news chain without any human oversight or reality checking. Investors also acted irrationally as well, reacting to a headline without any context to it.

As Wired's Kim Zetter notes, it's amazing this hasn't happened before. Of course, far more common are issues where rumor, conjecture, and outright lies are reported, such as when Engadget singlehandedly knocked $4 billion off of Apple's market value when it reprinted a phony email alleging that the iPhone would be delayed last year.

Which is worse: Outright malice from a hoaxster or sheer, mass stupidity from people who should have known better?