Nasdaq Facing Fallout on Twitter Premature Earnings Error

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Nasdaq OMX Group Inc.’s accidental early release of Twitter Inc.’s earnings may tarnish the stock exchange operator’s efforts to diversify as it faces increasing competition in its core business as a trading venue.

Nasdaq unit Shareholder.com posted the release on the Twitter website for 45 seconds Tuesday about an hour before it was due to go public. The early dissemination of the report, which showed revenue and outlook falling short of analysts’ forecasts, sent Twitter’s stock plunging and led to a trading halt. The company’s quarterly results were then officially published during the day’s trading session. Twitter’s shares closed down more than 18 percent.

In October, Shareholder.com prematurely released JPMorgan Chase & Co.’s third-quarter earnings. Investors also still remember the delayed opening of Facebook Inc.’s debut in 2012, and an incident in August 2013 when trading in all of Nasdaq’s listed companies was stopped for more than three hours after a malfunction of its Securities Information Processor, said Larry Tabb, chief executive officer of research firm Tabb Group LLC.

“This pre-release of Twitter’s earnings was not good for the brand, especially after Facebook and some of the challenges with the SIP, it doesn’t help,” Tabb said. “They are an exchange and they’re held to a higher level of scrutiny and so it’s critical for them to get this right”

Increasing Competition

The embarrassment comes as Nasdaq faces increasing competition for trading and listings from Intercontinental Exchange Inc., the owner of the New York Stock Exchange, and Bats Global Markets Inc., which overtook Nasdaq earlier this year as the second-biggest exchange operator in the U.S. by trading volume. The NYSE has snagged technology companies such as Twitter and China’s Alibaba Group Holding Ltd., an area that Nasdaq had long dominated.

Twitter’s shares began plunging at 3:08 p.m. New York time, falling as low as $48.06, a 7 percent decline from the prior day’s close. They were halted 20 minutes later. Trading resumed after about 20 minutes, during which time the company officially released its results. After the resumption, the stock fell more than 20 percent, ending the session down 18.2 percent, due largely to revenue and an earnings forecast that fell below analysts’ estimates.

“The posting was caused by an operational issue that exposed the release on Twitter’s IR website for approximately 45 seconds,” Nasdaq spokesman Joseph Christinat said in a telephone interview. “During those seconds the site was scraped by a third party that publicly disseminated the earnings information.”

The results were first reported by Selerity Inc., a New York-based provider of financial news and information.

“It is an automated process that detected it from Twitter’s investor relations page,” Ryan Terpstra, Selerity CEO, said in an interview. “Our goal is to do automated event detection.”

Selerity’s Role

In December, Selerity published the content of the ADP Research Institute’s private payrolls report four minutes before its scheduled release after discovering it on ADP’s website. In 2011, Microsoft Corp.’s earnings were published more than an hour ahead of schedule after Selerity used its software to obtain the press release from the technology giant’s website.

Bloomberg News and its parent, Bloomberg LP, compete with Selerity in providing news and information to the financial community.

Nasdaq’s corporate solutions group, of which Shareholder.com is a part, had revenue of $314 million last year and about 10,000 clients, according to a filing. The company doesn’t break out details for Shareholder.com.

JPMorgan Mistake

“We regret the incident and remain fully committed to providing the highest quality investor relations products and services to our clients,” Nasdaq’s Christinat said.

Among Shareholder.com’s competitors to provide investor relations services are Ipreo Holdings LLC, which was bought last year by Blackstone Group LP and Goldman Sachs Group Inc.’s merchant banking unit.

Seven months ago, JPMorgan’s third-quarter results were published more than three hours ahead of schedule, appearing online at about 3:30 a.m. in New York. The bank had set 7 a.m. for release of the market-sensitive data.

“The root cause was a human error internally at Shareholder.com,” Ryan Wells, a Nasdaq spokesman, said in an e-mailed statement at the time.

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