WASHINGTON: Mortgage finance giant Fannie Mae blamed a recent one-day sell-off in its shares on its wire service, Business Wire (BW), after BW disseminated a statement that sent Fannie Mae's shareholders into a mild panic, briefly shaving more than $4 billion off the company's market value.
At 12:40pm EST on October 29, BW sent out a so-called kill advisory - a notice sent out to retract information from a previously disseminated release. That advisory announced that Fannie Mae was "killing" its previously issued October 16 earnings release. The company's stock began trading down shortly thereafter. Fannie Mae shares soon bounced back when a 2:20pm EST press release revealed that the accounting error that caused the kill statement was a minor one.
In a statement issued the next day over PR Newswire (PRN), Business Wire's major competitor, Fannie Mae asserted that it did not authorize the kill.
"We contacted the business service we use to distribute press releases [BW] to inform the service what we planned to do once the documents were finalized," said Jayne Shontell, SVP, IR, in the statement. "Before we even sent the business service the documents to be disclosed, the service - on its own and without our prior knowledge or authorization - put forth a statement, attributed to Fannie Mae, 'killing' our previously issued October 16 press release," explained Shontell.
Cathy Baron Tamraz, president of BW, called the incident "a misunderstanding," and maintained that as BW understood it, Fannie Mae had in fact authorized a kill. She said, however, that BW is "under complete review of all our communications practices," as a result of the incident.
Regarding Fannie Mae's decision to issue its next-day statement through PRN, Tamraz said she was "concerned," but that she still considers the company a client because she had not been told otherwise.
PRN declined to comment on its relations with Fannie Mae. Fannie Mae did not return calls or e-mails seeking comment for this story.
One of the first outlets to break the story, Reuters compared the incident to the notorious 2000 debacle experienced by Internet Wire (now Market Wire), when a former employee sent out a false release about the computer firm Emulex, which sent shares of that company on a wild one-day ride.
Tamraz, however, said the two incidents are entirely different, and that drawing the comparison "reeks of sensationalism." She added, "We are not considering this a security issue. It is a communication issue. When you deal with human beings, misunderstandings will occur from time to time."