Felix Salmon of Reuters wonders what would happen to the relationship between business journalists and investors if media organizations started selling exclusive stories to the people who wanted them — investors — before anyone else had access to the content.
Salmon writes, “In a sense, there’s something very economically inefficient about scoops like this one. The NYT story came out in the middle of the weekend, when markets were closed; when they opened on Monday morning, both Walmart and Walmex had billions of dollars shaved off their market capitalizations, but no one was given the opportunity to short those stocks at their prior level. After many months of diligent and valuable work on this story, one would think that a genuinely capitalist economy wouldn’t just leave money on the table like that. After all, buy-side institutions pay millions of dollars to analysts who research companies like Walmart in depth; isn’t that exactly what the NYT was doing?
“For years, short-sellers have briefed journalists when they find out something damning about a company: think of Jim Chanos, for instance, putting Bethany McLean on to Enron and other companies. More recently, a group of people ranging from Mark Cuban to John Hempton to Muddy Waters to Anonymous Analytics has merged the shorting and the reporting functions, putting on short positions before releasing their own research on a company in the hope of seeing that company’s shares fall as a result.
“But while the world doesn’t seem to have blinked very much at shorts helping reporters, there’s a much more visceral opposition to the idea that reporters might ever help shorts. If the NYT were to give any hedge fund an advance peek at its reporting, goes the argument, well, that would be bad.
“The journalism-ethics angle to this hasn’t really been fleshed out, though. Mathew Ingram, for instance, says that if news is being put out in the public service, then it shouldn’t be ‘just another commodity’; if the NYT were to go down this road, then ‘that would make it a very different type of entity than it is now’. It’s all very vague and hand-wavey.”
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