Fake Press Release Caused Emulex Bear Raid
Emulex was the unfortunate company to succumb to a coordinated attack on their stock, known as a “Bear Raid” back in 2000 when Mark Jakob released a fake news story on the Internet Wire news service regarding Emulex.
This “Press Release” claimed that the CEO was resigning, that fourth quarter earnings would have to be restated and that the company was under investigation by the SEC. Jakob was able to get the press release out because of being employed at Internet Wire.
This was a blatant “bear raid” that was orchestrated by one person, Mark Jakob. Jakob sold shares in Emulex short before disseminating the fraudulent news release, and profited between $230k and $240k when all was said and done. Jakob didn’t cover his tracks well, and was arrested shortly thereafter.
Emulex (ELX) on August 25, 2000 was halted 15 minutes after the stock market opened. It’s stock opened at $110.69, had a trading range of $130.00 to $43.00 per share on the day and closed at $105.75 per share on volume of 22,484,400 shares.
Some market traders were suspicious, because the press release was so poorly written, held onto their shares and actually profited on the day as it had risen over 17% intra-day from the previous days close as the news broke about the false rumor.
Sometimes, members of an online chat room decide that they are going to band together to short the shares of an “Illiquid Stock” to drive the shares lower or they are then going to post “False Rumors” about the stock on various investment message boards, these people are hoping to create a panic that allows them to cover their short positions at a profit. Again, this is illegal manipulation and is not tolerated by the SEC.
Emulex Corporation provides network convergence solutions that connect servers, storage, and networks within the data center. The company designs, develops, and supplies host server products, including host bus adapters, universal converged network adapters, and application specific integrated circuits that enable servers to connect to local area networks, storage area networks, and network attached storage; and embedded storage products comprising switch-on-a-chip products, embedded storage switches, bridges, routers, and input/output controllers, as well as provides custom form factor solutions for original equipment manufacturer (OEM) blade servers.
In addition, it offers contract engineering services. Emulex Corporation sells its products to OEMs and end users worldwide, as well as through value added resellers, systems integrators, industrial distributors, and resellers. The company was founded in 1979 and is headquartered in Costa Mesa, California.
Emulex was able to have 3 stock splits in succession (Aug 31, 1999 [2:1], Dec 16, 1999 [2:1], Dec 18, 2000 [2:1]) before finally collapsing to $8.27 per share last year (2010) because of the “Dot Com” market crash, 2002 Bear Market, 2008 Bear Market along with poor sales on products.
Tags: 2002 Bear Market, 2008 Bear Market, Bear Raid, CEO, Chat Room, Coordinated Attack, Dot Com Crash, ELX, Emulex, False Rumors, Fourth Quarter Earnings, Halted, Illiquid Stock, Internet Wire, Intra-Day, Investigation, Mark Jakob, Market Traders, OEM, Press Release, SEC, Short Positions, Stock Split, Suspicious