Capital Markets

Equity Markets: Paul, er Larry, Is Not Dead

Oracle's stock didn't recover until the company denied an unfounded rumor about its CEO's resignation.
Joseph RadiganNovember 2, 2000

How many people remember the lyrics “Cranberry Sauce” from the Beatles’ song, I Am The Walrus? Some graying Baby Boomers may recall how that phrase were mistaken for “I buried Paul” and contributed to the “Paul is Dead” hysteria that swept Beatlemania like a tsunami.

The rumors didn’t subside until McCartney himself appeared on British TV and announced he was still among the quick, no matter what the Walrus said.

Well, Thursday, some rumors swept up database software company Oracle Corp. that chief executive and founder Larry Ellison, and Jeff Henley, the company’s chief financial officer, had abruptly quit the company.

The wildest version of the rumor had it that Ellison had actually left this mortal coil.

Nothing could be further from the truth, said Oracle. The company did not put out a formal statement, and a company spokeswoman said shareholders should not expect a McCartney like appearance by Ellison on CNBC’s Squawk Box, but the spokeswoman did say, “These rumors are categorically unfounded. We don’t know where they got started.”

One obviously annoyed securities analyst refused to discuss the issue at length, but before hanging up his phone, told a reporter, “This is total hedge fund nonsense. This story should die.”

Nonsense or not, the rumors fueled heavy trading in Oracle’s shares, most of it building up in the late morning, when the stock fell to an intraday low of $27.25, before the stock rebounded to a closing price of $29.56. Overall, Oracle’s shares lost $1.81 on unusually heavy volume of 149 million shares, about six times more than the stock trades in a normal day.

As an indication of just how blindsided some of the Wall Street pros were by the rumors, another source said, “We didn’t even hear about it until our traders called us up and asked us what was going on.”

Yet a third person at a brokerage firm said the rumors were able to gather so much force so quickly, simply because investors are so skittish. The markets have been so volatile with intraday swings of 100 to 200 points being the norm for weeks, that some market bears will put in a sell order at the slightest hint of trouble. That’s apparently what happened in this case.

Oracle is not the first company to get hit hard by an unfounded rumor in recent weeks. In late August, Emulex Corp., a California maker of networking products, saw its stock drop more than $60, losing 60% of its market cap midway through a trading session before the company’s management said a press release that had gone over the newswires earlier that day was a forgery. By the session’s close, the shares had rebounded and were only down $7 and change for the day.

The damage Oracle’s stock suffered was hardly as serious as all that, and perhaps there’s a silver lining in the story. Emulex’s shares have been on a steady climb upward since late August. Thursday, the stock gained more than $15, closing at $153.

Goo Goo Ga Joob.