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United Plummets on Old News


Rumor debacle also impacts other airlines.

On Monday, United Airlines (UAUA) disseminated a press release denying rumors that the company has filed for bankruptcy. United attributed the rumors to "the irresponsible posting of a 6-year-old Chicago Tribune article by the Florida Sun-Sentinel website with the date changed. The story was related to United's 2002 bankruptcy filing, and United has demanded a retraction from the Sun Sentinel and is launching an investigation."
The Florida Sun Sentinel, for its part, said that the Tribune story was republished by an investment advisory and research firm as though it were current news.

All this talk of bankruptcy caused some to think that United was going the way of the dodo; unsurprisingly, the shares got spanked and closed down more than 11% on the day.
Even though United put out a statement saying that reports of its death have been greatly exaggerated, it may have left a bad taste in some retail and institutional shareholders' mouths. This may have caused them to bail or may cause them to bail in the near future.
And I think the impact may have gone beyond United. For instance, despite the Dow being up more than 2.5% on Monday, a number of major airlines had a tough trading day. AMR Corp. (AMR) closed at $10.46, down 49 cents or 4.47% on the day. Meanwhile Delta (DAL) closed at $8.59, down 22 cents or 2.5%.
Of course, it's impossible to prove the correlation, without polling each seller and ask him or her why he or she sold. That said, all these players were down on a big up day. It's also interesting to note that each got pummeled right around 11am - which leads me again to believe that there was some correlation. Just look at the charts for United, AMR, and Delta.

In short, United said it isn't going belly up - and this saga should teach us that mistakes do happen. That's why we should always be on our toes.
UAL closed at $10.92, down $1.38 or 11.22%.
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No positions in stocks mentioned.

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