THE Walt Disney Company (NYSE:DIS) yesterday saw its stock plunge after the company’s earnings release, disclosing worse than expected results, was discovered on its website at least 30 minutes prior to the normal release time.
The incident, which is similar to a situation that hit Dell Inc. last year, once again highlights the importance of companies putting in place effective web disclosure controls and technologies.
It also demonstrates how fast information is disseminated on today’s real-time web – even when it is posted without notice on a company’s website.
Disney’s senior vice president of investor relations Lowell Singer said the company was investigating the gaffe, but did not provide further details. “We do regret any confusion caused by this incident,” he said.
Bloomberg’s web spider
My own analysis suggests that a web scraping program operated by Bloomberg picked up Disney’s Q4 2010 earnings release from the company’s investor relations website before the earnings were officially released.
It’s possible that the Bloomberg spider picked up the release from an unpublished URL by guessing the release’s file name.
Disney posts all of its earnings releases on its self-hosted website in PDF files that all use a predictable file-naming formula. For example, the Q4 release picked up by Bloomberg is named 2010_q4.pdf, the prior quarter is 2010_q3.pdf, and last year’s Q4 release is 2009_q4.pdf.
If Disney uploaded the release PDF to the company’s server prior to making it accessible on a public web page, someone could easily have accessed it by guessing the URL.
According to the Q4 PDF release’s metadata, the file was created from a Word document at 2:57 pm ET, so it’s conceivable that it was uploaded to the staging server a short while later and then retrieved by Bloomberg’s spider by predicting the URL.
Ironically, National Investor Relations Institute CEO Jeff Morgan warned members just this week about this very thing having occurred at an unnamed company.
Information spreads lightning fast on the real-time web
The incident also demonstrates how fast information spreads on today’s real-time web. Trading in Disney’s stock was modest until just before 3:29 pm ET when the news broke, sparking a sell-off that saw shares fall 5% by 3:33 pm.
During those four minutes, real-time messaging systems StockTwits and Twitter were buzzing with information about the surprise results.
The first to report the news outside of Bloomberg was Dan Pratt, an equity options trader at Maverick Options in Chicago, who goes by the StockTwits handle maveric1k. His first message (see below) about the bad results came at precisely 3:30:25 pm ET.
After realizing that its release had leaked, Disney was forced to issue its earnings release via Business Wire 16 minutes earlier than scheduled at 3:44 pm.
In the rush, however, Business Wire forgot to properly tag the release and had to issue a second version at 4:28pm ET with Disney’s ticker symbol added.
Lessons to learn
At the end of the day, it was all quite a mess, one that could easily have been avoided.
One lesson in it for IR departments is that running an investor relations website isn’t a joke. You need to get a handle on your website practices, invest in good technology, and have an IR website manager on your team who understands disclosure and web technology.
The other lesson is that news can go from an unannounced posting on a single web page to thousands of eager investors in just a few minutes — without a company having to pay a PR wire to distribute the information.
Of course, it’s best if you actually plan it that way.