Twitter’s (NYSE: TWTR) quarterly earnings were bleak but the company had a bigger problems on its hands Thursday: the earnings appeared online early.
When a company’s earnings are obtained early it’s a serious issue. It’s considered to be an unfair advantage for some traders to receive information before others, as they can use that information to their advantage to make trades. Because of this regulatory officials go to great lengths to ensure that all traders have equal access to the same information.
The reason why Twitter’s earnings appeared early is Twitter itself. For a few seconds its earnings report appeared early online but was taken down when the mistake was found. But despite that it was only up for a few seconds, this was long enough for scraping service Selerity to grab it and disseminate it to its followers.
— Selerity (@Selerity) April 28, 2015
Selerity was also clear that it didn’t engage in anything illegal to get this information. It didn’t hack anyone, nor did it solicit someone to leak it this information. It simply accessed publicly accessible information and reported on it.
In the end Twitter said that NASDAQ was at fault for the leak, as the exchange operates Twitter’s Investor Relations section as it does for many other companies.
“Nasdaq hosts and manages our IR website and we explicitly instructed them not to release our results until after the market closed and only upon our specific instructions, which is consistent with prior quarters, Twitter said in a statement. “We’re continuing to investigate with them exactly what occurred.”
NASDAQ ended up taking the blame in a later statement.
“The posting was caused by an operational issue that exposed the release on Twitter’s IR website for approximately 45 seconds. During those seconds the site was scraped by a third party that publicly disseminated the earnings information,’ a representative said on CNBC. “We regret the incident and remain fully committed to providing the highest quality investor relations communication product and services to our client.”
Did Selerity do anything illegal?
As Selerity made clear, it did not hack Twitter or NASDAQ to obtain the results nor did it solicit a leak. The results were online for anyone to see, provided that they were on the specific page in the 45 seconds the results were online.
But this doesn’t mean Selerity is in the clear. According to a report by Ars Technica, people have been prosecuted before for accessing publicly available information that wasn’t meant to be seen.
But Selerity’s actions remind us of the exploits of Andrew “weev” Auernheimer, who was criminally prosecuted on hacking charges for obtaining and disclosing the personal data of about 140,000 iPad owners from a publicly available AT&T website.
In that case, the Justice Department took the position that AT&T did not intend for the public to see the data and that the links Auernheimer accessed were located in a place that an everyday computer user would never stumble upon. In short, the data he accessed wasn’t intended for public consumption despite it being public.
In the end Aurnheimer’s case was dropped on appeal. But this could provide some complications for Selerity, particularly since its also dealing with securities.