Apple flash crash: $10 billion market cap loss in four minutes

apple stock

A sudden spike in trading volume sent Apple stock tumbling Thursday in a flash crash that defies explanation. Image: CC dcwriterdawn/Flickr

The value of Apple stock hit a record high Thursday before suddenly diving of a cliff. By the time the Apple flash crash stabilized, the Apple stock price had fallen $10 in four minutes. Analysts guessed that either rumors about Steve Jobs’ health or gaming by short-sellers triggered the flash crash of Apple stock.

Sudden Apple stock sell-off

Apple stock value is expected to only go upward, which makes the Apple flash crash a mystery. Apple stock was cruising along at nearly $360 a share until it started trending down about 1 p.m. Thursday. At 1:39 p.m., Apple stock collapsed from $355 to $349 a share. In four minutes Apple, a company worth more than $300 billion, lost $10 billion in market capitalization. Trading volume of Apple stock spiked upward as hard as the value of Apple shares dove. At the bell, Apple stock was at $354.54, down $3.62, or 1.01 percent from Wednesday’s close of $358.16. Trading volume for Apple stock Thursday was 33.1 million shares, about twice the volume of Apple shares than other day this month.

Previous Apple stock irregularities

Apple stock has handled twice the trading volume without a flash crash. When Steve Jobs announced his medical leave Jan. 18, 66 million shares were traded, and another 40.5 million Apple shares traded the following day. The easy explanation was rumors that Steve Jobs was hospitalized. Another theory was that lines in front of stores for the Verizon iPhone debut Wednesday were not as long as expected. Apple stock analyst Andy Zaky was quoted on several websites saying the Apple selloff was “extraordinarily similar” to the flash crash that sent panic through the New York Stock Exchange last May.

Likely reason for the Apple flash crash

The reasons for the Apple flash crash floated by analysts don’t make sense. When Steve Jobs took a break, the public expected the worst. But he was seen on Apple’s Cupertino, Calif., campus last week and spotted having lunch at an Indian restaurant in Mountain View Tuesday. Concerns about the Verizon iPhone don’t seem credible. The iPhone set a sales record for Verizon the first three hours it was on sale. Analysts also expect Apple could sell between 30 million and 40 million iPads in 2011 for $18 billion to $20 billion in revenue. The most likely reason for the Apple flash crash is sleazy: short-sellers floating rumors for a quick windfall.

Sources

Fortune

IT World

ZD Net

Seeking Alpha

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