Once Bitten: Lessons From the Emulex Hoax

Do you smell that? It's the smell of scores of investors burned by another online hoax involving phony company news.

The latest case: A news release on the Internet this morning claimed Emulex (EMLX Quote) would restate earnings and report a loss rather than a profit. The stock, in turn, plunged 57% before it was halted on the Nasdaq Stock Market.

Emulex reopened after the hoax was detected and the stock regained most of its value, closing down 7 5/16, or 6.5%, at 105 3/4. But in the interim, many investors dumped the shares first and asked questions later. Among the many questions now being asked: How can investors protect themselves from making the same mistake twice? ...