Fake Memo Roils Apple Stock; Investors Call for SEC Probe

Investors buffeted by the wild ride Apple (AAPL) stock took today are calling for the SEC to investigate the fake internal memo that set it off --- and the suspicious stock trading that ensued.

Apple fell more than 4.47 points -- wiping just over 4 billion off the company's capitalization, according to Techcrunch -- in the space of six minutes after Ryan Block, a reporter for Engadget, posted a report that Apple's iPhone would be delayed by four months and its new Leopard operating system by three.

Block's post was based on what appeared at first glance to be a real internal memo -- marked "Bullet News" --  sent to an unknown number of Apple employees and forwarded to Engadget. It said, in part:

Apple issued a press release today announcing that iPhone which was scheduled to ship in June, has been moved to October and the release date for Mac OS X Leopard has been moved to January next year.

Apple moved with unusual alacrity to quell the rumor -- issuing a real press release assuring the public that both products were on schedule. Engadget quickly posted a retraction.

The stock recovered most of its lost value, but not before a lot of investors holding complicated positions in the options market got squeezed. According to one report posted on Ars Technica, someone dumped five million shares within a 10 to 15 minute period.

Much of the commentary on The Mac Observer's investor's forum was unprintable.

"Slick new hedgie technique," wrote dmcnair, posting from Seattle. "Hack into AAPL internal memo system. Press releases and results follow. Much more efficient than CNBC."

"The SEC want to investigate something?" added Tommo_UK from London. "They should go hell-for-leather on this, if Apple don't themselves." (link)

The stock closed at 107.34, down 0.17% for the day.

Comments

[fyi]

It's Ryan Block, not Black.

[ratty]

Mr. de Fudd do some actual reporting... Or at the very least get your facts right... The guy at engadget is called Ryan Block - and not as mentioned in your article Ryan Black!

[ratty]

You don't consider this a real news source do you? I don't expect them to get names right. I can't believe Yahoo Finance picks this crap up.

[BobbyW]

Sorry guys I accidently posted as ratty. long day.

This was my post:

"You don't consider this a real news source do you? I don't expect them to get names right. I can't believe Yahoo Finance picks this crap up."

[ratty]

HEY BobbyW,

If you are going to make comments - the LEAST you could do is get your own name right ;-)

[Philip Elmer-DeWitt]

BobbyW, posting as ratty, writes: "Mr. de Fudd do some actual reporting... Or at the very least get your facts right... The guy at engadget is called Ryan Block - and not as mentioned in your article Ryan Black!"

ex ped: Fixed. Thanks for the catch. (If only Engadget wouldn't print their tiny bylines in light blue type...)

[emb]

The stock is long overdue for a pullback anyway - even if there's no product launch delays.

[Jonathan Phillips]

Some people "holding complicated positions in the options market got squeezed"? This was driven by a rumor, not logged-on computers monitoring the real numbers or it wouldn't have had such adverse results. Mine is still ++ over two weeks ago. No whining....

[MadMac]

If someone "dumped" 5mm shares after this story hit, that's not news, they just sold at the bottom. The real news is who BOUGHT at that point.

C'mon, think about it.

[John Jobs]

I dont see anything wrong here since the iphone is going to be delayed 8 months

[Glenn Fleishman]

I can't tell from the comment on the Ars Technica article how the person knows that one person sold 5m shares (and whether at the top or bottom of today's range). I can see that a short seller or someone with put options would use a drop to improve their position. The stock dropping wouldn't force a short squeeze. I think this is an option expiration date, so that might be part of it. There's rarely money to be made by someone selling the stock after it drops; nor if the stock drops and returns to its previous range.

[decastroharry]

when you play a call option most people lock in thier profit but when the call option drops as it did today they have to sell position to lock in profit or its possible they had put plays, or they straddled thier position .....this rumor rippled and panicked many investors who sold thier positions ...need more be said thier position could be june calls july calls ... what also is relevant is the strike price where the stock can be exercised from you .......anyway most apple investors live to play another day im long and i can write contracts to sell to open as i own the stock ......and i can buy to close the same position also...now if some other investor exercised thier right to the stock as it falls beneath 105 they would have to buy and purchase the stock at 105 and the stock can be taken away because you have been exercised ... that could have happened to that stock player who dumped 5 million shares as his position.... could have possibly been out of the money ..... anyway i only write call positions when the stock goes up thats the best time to make $$$$$$on the preuiumum its kida of hard to understand but most option call players understand and most have a strategy for thier call positions as expiration becomes close the value of certain strike prices will expire out of the money ....any way good good luck to the share holders who play apple it is a great stock to own look at the profits it makes for thier shareholders