Google’s Big “Oops” Moment

Search giant accidentally releases 8-K filing three hours early, causing shares to drop 9% before trading is halted.
Vincent RyanOctober 18, 2012

Google accidentally released an incomplete version of its third-quarter earnings report ahead of schedule on Thursday, and Google shares plummeted when the earnings numbers missed analysts’ expectations.

Trading in Google shares on Nasdaq was halted around 1:40 p.m. Eastern time, at Google’s request, after the unexpected news of an earnings miss led to a precipitous drop in the stock’s price.

“We have ceased trading on Nasdaq while we work to finalize the document,” Google said at the time. “Once it’s finalized we will release our earnings, resume trading on Nasdaq, and hold our earnings call as normal at [4:30 p.m. Eastern].”

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Google shares fell 9% before trading was halted, most of that occurring within the first 15 minutes after the news hit the wires.

The draft 8-K showed a 20% drop in Google’s net income, to $9.03 a share, well off the $10.65 per share analysts had been expecting. In addition, reported revenue of $11.33 billion, excluding the Motorola Mobility acquisition, was more than $500 million below Wall Street’s projections.

The third quarter was the first to incorporate the results of Motorola Mobility, a deal Google closed in May. The unit, which makes smartphones and set-top boxes, had a $527 million operating loss for the period.

More importantly for Google’s business model, its average cost-per-click dropped 15% over the third quarter of 2011 and 3% from the previous quarter.

Investors may have been especially spooked by the results because the draft earnings statement was not accompanied by comments on why the company missed earnings, as usual. The press statement about Google’s results was only partially written and contained a placeholder — “PENDING LARRY QUOTE” — for a quote from CEO Larry Page.

The official press statement released later contained this quote from Page:

“We had a strong quarter. Revenue was up 45 percent year-on-year, and, at just fourteen years old, we cleared our first $14 billion revenue quarter.” He added, “I am also really excited about the progress we’re making creating a beautifully simple, intuitive Google experience across all devices.”

The financial results in the draft 8-K were accurate and unchanged in the official version, which was released at 3:10 p.m. Google resumed trading at 3:20 p.m. and shares rebounded about 2% in the first 20 minutes.

Google said the mishap occurred when its financial printer, R.R. Donnelly, prematurely filed the company’s 8-K earnings statement through the Securities and Exchange Commission’s EDGAR system without authorization from Google.

R.R. Donnelly said it was “fully engaged in an investigation to determine how this event took place.” The printer’s shares dropped more than 4% after the statement by Google, but subsequently recovered.

Google did not reschedule its earnings call, which was set for 4:30 p.m. Eastern time.