What happened with my UAL shares last week and who can I sue?

Call me an optimist, but I recently purchased some shares in the major airlines (including American (see their parent company AMR legal agreements here), Southwest, and, of course, United Airlines and their agreementshere) as I saw oil prices falling in the past couple of months, figuring that their nickel and diming, combined with the drop in oil prices, would outweigh the impact of the sagging economy on their share prices.

Needless to say, I was stunned on Monday when I watched UAL share drop 75% only to recover to a paltry $9 share, down from the $12 opening price.  Of course, I was somewhat mollified that the shares largely recovered by the end of the week, but I couldn’t help wonder what might happen to all those who sold on the way down, only to discover it was all a mistake.

For those who aren’t familiar with the background, it appears that the South Florida Sun-Sentinel newspaper posted a story from 2002 on the UAL bankruptcy from 6 years ago on their website as if it had just happened, and then promoted it to their most actively viewed portion of its website.  Google News’ spiders picked it up (see Google legal agreements, followed by a Bloomberg analyst.  From there, the news was broke and chaos followed, and it was probably compounded by all those handy tools like “stop loss” orders which work well in orderly market environments but can horribly accelerate fast moving negative trends.

Karim Bardeesy had a nice discussionabout the potential legal liability for the various parties, including NASDAQ, which refused to reverse trades from that difficult morning.  The author’s conclusion – fat chance.  For me, I was a bit late picking up on the news, but I had faith that the market had fairly priced in UAL’s chances, so that once the news shook out, the UAL price would/should return to the prior levels, absent any other changes.  I think the events of the week largely bore that out.