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Bogus iPhone Cutback Claims Hurt Investors
by , 11:20 AM EDT, August 1st, 2007
After rumors that Apple was scaling back production of the iPhone surfaced on Tuesday, the company's stock took a sharp nose dive and dropped about US$9. Unfortunately for investor pocketbooks, that rumor turned out to be unfounded, according to CNBC.
TheStreet.com cited a report from the analyst firm Miller Tabak & Co., but now the company has stated that it issued no such news. Peter Boockvar, a trader at the firm, commented "We weren't issuing any kind of report. We don't have an Apple analyst."
Despite the inability to confirm that the rumor was false, investors took it as fact, driving Apple's stock down and cutting $8 billion off the company's market cap.
Apple faced a similar situation earlier this year when a rumor surfaced that the company was delaying the iPhone launch for an additional six months. That rumor also turned out to be false, but the company's stock dropped several points before the information was corrected.
The Mac and iPod maker's stock still hasn't recovered from yesterday's shakeup. Apple is currently trading at $129.85, down 1.91 (1.45%).
If you are interested in Apple's stock, join our forum members in the Apple Finance Boards, a moderated forum for Apple Investors and people who are interested in Apple's financial dealings. For other stories regarding Apple's stock activity, visit our updated Apple Stock Watch Special Report.
Observer Comments
Wed Aug 01, 2007 11:59 am Subject: yeah, I thought so
Wed Aug 01, 2007 11:56 pm Subject: Re: people should be charged
QuoteAnonymous wrote:
The firm who created and or posted the unconfirmed news should be held liable for losses. Start writing checks or go to prison.
First, I'm not an attorney. However, I am a student of civil rights.
It's probably unlikely that anyone will or even can be prosecuted. There is a little-known and oft-ignored bit of paper called the Bill of Rights, containing, among other things, the First Amendment. Freedom of speech and of the press apply to almost any speech that is not libelous/slanderous, defamatory or fraudulent (despite the contentions of the current US administration).
Libel, slander, defamation and fraud all require malicious intent, if the law students I've worked with were correct. (If I understand correctly, it's even harder to prove slander or libel if the aggrieved party is a pubic figure or corporation.) Damage, alone, is apparently not a sufficient basis. In any case, I believe that slander, libel, and defamation are civil torts, not crimes. Of course, it's possible that fraud could be either civil or criminal (or both).
If it could be proved that whomever initiated the rumor knew that it was not true or probably was not true and initiated or spread it in an attempt (apparently successful) to manipulate the stock price, then, I would think, there might be a case for action. By itself, spreading unconfirmed rumors is probably not actionable. If it were, nearly all journalists covering Wall Street would be in jail, along with a lot of "analysts."
It might also depend upon who initiated/spread the rumor. Journalists, while they may have some sort of ethical code, are probably not regulated by the SEC. Brokers almost surely are. I don't know where "analysts" fit in that determination.
One of the articles about the rumor made the point that all journalists and analysts have made mistakes. If this was simply a mistake, it's part of the game. As some famous person surely must have said, "Sh*t happens."
As the previous guest implied, those who exhibit herd-like behavior and base their investment decisions on rumor, unconfirmed information and fear will, in the long run, be poorer for that. The drop in the stock price is one more bit of proof that the stock market is not "rational."
Well, I am an attorney, although not a criminal one. I can tell you for a fact that an analyst cannot intentionally issue a false public statement concerning stocks. Manipulating the market is illegal.
The First Amendment is irrelevant for the same reason it doesn't protect somebody who goes into a crowded room and yells fire.
Quotegslusher wrote:QuoteAnonymous wrote:
The firm who created and or posted the unconfirmed news should be held liable for losses. Start writing checks or go to prison.
First, I'm not an attorney. However, I am a student of civil rights.
It's probably unlikely that anyone will or even can be prosecuted. There is a little-known and oft-ignored bit of paper called the Bill of Rights, containing, among other things, the First Amendment. Freedom of speech and of the press apply to almost any speech that is not libelous/slanderous, defamatory or fraudulent (despite the contentions of the current US administration).
Libel, slander, defamation and fraud all require malicious intent, if the law students I've worked with were correct. (If I understand correctly, it's even harder to prove slander or libel if the aggrieved party is a pubic figure or corporation.) Damage, alone, is apparently not a sufficient basis. In any case, I believe that slander, libel, and defamation are civil torts, not crimes. Of course, it's possible that fraud could be either civil or criminal (or both).
If it could be proved that whomever initiated the rumor knew that it was not true or probably was not true and initiated or spread it in an attempt (apparently successful) to manipulate the stock price, then, I would think, there might be a case for action. By itself, spreading unconfirmed rumors is probably not actionable. If it were, nearly all journalists covering Wall Street would be in jail, along with a lot of "analysts."
It might also depend upon who initiated/spread the rumor. Journalists, while they may have some sort of ethical code, are probably not regulated by the SEC. Brokers almost surely are. I don't know where "analysts" fit in that determination.
One of the articles about the rumor made the point that all journalists and analysts have made mistakes. If this was simply a mistake, it's part of the game. As some famous person surely must have said, "Sh*t happens."
As the previous guest implied, those who exhibit herd-like behavior and base their investment decisions on rumor, unconfirmed information and fear will, in the long run, be poorer for that. The drop in the stock price is one more bit of proof that the stock market is not "rational."
QuoteTerrin wrote:
Well, I am an attorney, although not a criminal one. I can tell you for a fact that an analyst cannot intentionally issue a false public statement concerning stocks. Manipulating the market is illegal.
The First Amendment is irrelevant for the same reason it doesn't protect somebody who goes into a crowded room and yells fire.
Thanks for the clarification. I did say much the same thing:
"If it could be proved that whomever initiated the rumor knew that it was not true or probably was not true and initiated or spread it in an attempt (apparently successful) to manipulate the stock price, then, I would think, there might be a case for action."
I also made the point that journalists would probably be covered by the First Amendment if they simply reported the rumor, rather than initiated it.
"It might also depend upon who initiated/spread the rumor. Journalists, while they may have some sort of ethical code, are probably not regulated by the SEC. Brokers almost surely are. I don't know where "analysts" fit in that determination."
Are analysts specifically covered by Federal statutes or SEC rules?
The comment from Justice Holmes about falsely "shouting fire in a crowded theater" does not seem to me to quite fit this situation. Wouldn't falsely shouting fire come under the more general "clear and present danger" exception to freedom of speech, which, I understand, requires that the speech incite imminent lawless action, seemingly by other people than the person speaking?
Manipulating stocks, on the other hand, falls under specific statutes. Thus, it seems to me, the speech (rumor), itself, would be the lawless action, rather than inciting others to imminent lawless action. Perhaps that is too fine a point, though.
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