In October 2008, someone using the pseudonym johntw posted an item to CNN’s “iReport” site claiming that Steve Jobs, CEO of Apple, had suffered a major heart attack. This claim made its way to a financial blog and circulated quickly. Apple’s shares tumbled briefly, recovering when it became clear that the posting was a hoax.
The incident led to something of a frenzy in financial and journalistic circles, including widespread condemnations of citizen journalism. In my own blog, I urged people to calm down. CNN got used. Maybe it was an innocent mistake. Quite possibly, however, this was the work of someone whose intention was to briefly torpedo the Apple share price. As of this writing, while it’s clear what happened, we still don’t know who did it or precisely why; I doubt we’ll ever know.
This wasn’t the first time false information had affected a company’s market value. In the semi-famous Emulex case in 2000, for example, a profit-seeking fraudster who was trying to game share prices, posted false reports about the company to public-relations wires. He was caught and punished.
CNN’s iReport had been running this kind of risk for some time. The labeling of the site has never been, in my view, sufficiently careful to warn readers that they should not take for granted that the postings by its semi-anonymous contributors are accurate—or that readers who make any kind of personal or financial decision based on what they see on the site are idiots. CNN did learn from the experience, though. Today, if you go to the site you’re greeted with a pop-up saying, among other things: “So you know: iReport is the way people like you report the news. The stories in this section are not edited, fact-checked or screened before they post. Only ones marked ‘CNN iReport’ have been vetted by CNN.”
Is that enough? It helps, but not every news-reporting outlet—traditional or new media—can be counted on to disclose such things, despite the fact that they all should. What does that suggest? We each bear our own responsibility to be skeptical, especially when we have little or no clarity about the source.
The fact that Apple’s stock dropped, albeit briefly, was testament to the sellers’ own stupidity. Yes, they were victims, in a sense, of fraud. And they had every right to be angry at the supposedly responsible financial bloggers who picked up the false report and repeated it (though the bloggers did qualify their reports by saying they didn’t know whether the story was true). However, the sellers mostly had themselves to blame. They were fools not to take a second to consider the source, which was not CNN at all but a pseudonymous writer.
Investors fall into a special category as news consumers; they tend to operate on a hair trigger so they can profit from breaking news before other investors act and wipe out their advantage. As a result, they need to be particularly careful about where they get their information: The more they have at stake, the less they can afford to rush to judgment based on anything but trusted sources.