At a time when Wall Street is struggling to restore investor confidence, the
Nasdaq Stock Market
is teaming up with a company that played an unwitting role in one of the more memorable stock market hoaxes of recent vintage.
The Nasdaq announced this week that it is entering a revenue-sharing partnership with Market Wire, a four-year-old wire service that specializes in distributing corporate press releases. The deal calls for Nasdaq to promote Market Wire's services to companies that trade on the stock market.
Never heard of Market Wire? There's good reason. Up until Friday, the Los Angeles-based company went by the name Internet Wire. Internet Wire is best known for its role in an August 2000 stock market hoax involving shares of
In that incident, Internet Wire distributed a bogus Emulex press release that caused a brief but sudden 60% drop in the share price of the technology company. The bogus release, which claimed the company was restating earnings, was picked up and republished by several financial news organizations.
The hoaxer ultimately turned out to be a former Internet Wire employee who pleaded guilty to securities fraud. Internet Wire, which said it had no knowledge of the incident, had vowed to tighten its security measure in the aftermath of the hoax.
Those measures proved less than foolproof last summer, when a second hoaxer struck. This time the wire ran a bogus press release about a tiny drug company called
, in an apparent attempt to manipulate the stock. The hoaxer in that incident has never been identified.
Nasdaq officials were unavailable to comment on the deal, which is part of strategy by the stock market to broaden its corporate support offerings for publicly traded companies. The Nasdaq has also entered a similar partnership with the Webcasting company CCBN, in which Nasdaq will promote the Boston-based company's services.
In making its agreement with Market Wire, the Nasdaq is bypassing two much bigger press release distributors: PR Newswire and Business Wire.
Market Wire executives say the company has changed a lot from the days of the Emulex incident. A Market Wire spokeswoman said the company has "grown up a lot" since then, and that the name change reflects the company's broader array of services and clientele.
In promotional literature available on its Web site, Market Wire points out that it is "the most secure, cost-effective distributor of company news and financial announcements."
Jim McGovern, Market Wire's chief executive, said mistakes have been made by all the major press release wire services, and that it's unfair for anyone to single out his company.
"If you're going to be fair, the truth of the matter is there have been lots of incidents of releases with erroneous information from all the players in the industry," said McGovern. "This is an industry problem we all have to deal with."
Still, the timing of name change is curious. It officially occurred on April 25, just days before the partnership with Nasdaq was announced. The company never announced the change; it just went overnight from being Internet Wire to Market Wire.
McGovern said the company is still working on a press release about the name change and the deal with the Nasdaq. He said the name change had been under consideration for several months.
There's nothing unusual about a company changing its name to try and cast a new image for itself. Heck, tobacco king Philip Morris recently did it by rebranding itself as
. Even countries have tried it. The Asian nation of Burma changed its name a few years ago to Myanmar, after compiling a long record of human rights violations.
But it does seem as if the folks at Nasdaq and Market Wire want investors to forget Internet Wire ever existed, as they enter this new partnership.