What Just Happened to Google?

If you’re a fund manager, you’re long Google, and you need to report the value of your position as of the end of the quarter, what on earth are you going to say?

Google traded in a surprisingly narrow band for most of today, between $405 and $415 per share. Then, in the final three minutes of the day, everything went batshit. Volume spiked sharply, and the stock gyrated insanely, first spiking up to $489 and then spiking down to just $200 or so before officially closing at $349. In the sanity of the aftermarket, it’s now back to about $405, where you’d expect it to be.

Following its investigation, the Nasdaq is probably going to void all GOOG trades in the final few minutes — something which has one trader, at least, mildly miffed. But just look at the official datapoints: share volume of 12 million shares (that’s about $5 billion), more than double the normal amount; an intraday high of $489, and — most improbable of all — an intraday low of just 1 cent per share. The poor MarketWatch website can’t cope at all, and now says that Google’s close of $341 represents a drop of $171 per share. (No, it didn’t close yesterday at $512.)

The weirdness in Google stock reminds me of what happened to BB&T bank yesterday: it never traded below $36 per share until the final minutes of trading, when suddenly it spiked down to a close of $31, only to jump straight back up to the mid-30s again as soon as the market opened this morning.

Will the BB&T trades be voided too? These things matter, and not just for people holding knock-out options and similar exotica, but also in the real world — quite a few executive compensation packages are tied to things like the lowest level the share price closes at during a certain period.

In a market with volatility through the roof and thousands of stocks trading, a few crazy closing prices are only to be expected. I expect the Nasdaq and NYSE will do their best to void them, even if that does annoy a handful of day-traders.

Update: Nasdaq has acted:

Pursuant to Rule 11890(b) NASDAQ, on its own motion, has determined to cancel all trades in security Google Inc Cl – A "GOOG" at or above $425.29 and at or below $400.52 that were executed in NASDAQ between 15:57:00 and 16:02:00 ET. In addition, NASDAQ will be adjusting the NASDAQ Official Closing Cross (NOCP)and all trades executed in the cross to $400.52.

Update 2: According to Yahoo today (Wednesday), Google closed yesterday at $1,594.63 per share. Clearly things are still extremely skewy.

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