It's been a record-breaking year for fake merger and acquisition activity on Wall Street. A hoax posted on a fraudulent
The report - made from a dummy website - www.bloomberg.market - briefly sent Twitter shares soaring over 7%, and shares remain higher for the day. But, the report was also clearly fake, littered with misspellings and mistakes.
TWTR Price data by YCharts
It comes at a time when financial criminals are trying new methods to manipulate stock markets to their favor.
Earlier this year, a Bulgarian trader used filing databases overseen by the Securities and Exchange Commission to launch a fake buyout of Avon Products. Thankfully, the SEC was able to uncover the fraud in a matter of months, and it wouldn't be surprising for a similarly quick response regarding the fake Twitter auction.
Perhaps, the proliferation of market abuses underscores how much fraudsters believe they can trip algo traders who might not bother to read the content of a hoax, and it serves as a reminder of the amount of due diligence that's required in investing.
Still, there are ways to spot fake M&A bids, LBOs, and the like.
In the case of the Twitter hoax, a close reading of the article would have cast serious doubt on its credibility. The report spelled ex-CEO Dick Costolo's name wrong, and much of it either made no sense, or was grammatically incorrect.
"While a deal is expected to to be reached, bankers may rebuff any suitor or work out an eventual sale, the people said asking not to be named as the information is private," the report stated.
That's incomprehensible. The report is also littered with errors.
"It was a clear signal from Wall Street that it was happy the company decided to part ways with ex-CEO Richard "Dick" Costello."
"Under his leadership the company struggled to add new members and generate more revenue from it's ad products."
Anyone reading these sentences would doubt the validity of the piece. The headline was also objectively terrible, the URL was not Bloomberg's standard page, and the rest of site where the fake story is posted doesn't even work.
In the case of Avon, the Bulgarian trader misspelled the name of the fake firm with its fake bid. And the SEC filing copied another private equity firm's web site. It took Forbes about 30 minutes to connect the fake bid to another deal involving the Rocky Mountain Chocolate Factory.
For investors, especially those that don't simply trade on technical factors, these fake news releases can be caught. But they also raise big issues.
Media organizations like Bloomberg, The Wall Street Journal, Forbes and The New York Times rely on their reputation, and the reliability of their sources to break news. Today's hoax is not unprecedented; it merely brings a trick often used to move penny stocks to the forum of multi-billion dollar deal-making.
In April 2013, hackers broke into the Twitter account of The Associated Press to publicize a market moving bomb hoax. In the case of Forbes, fraudsters recently tried to create fake online cover stories to sell products or use covers to pump penny stocks.
Having market manipulators try to co-opt hard won reputations, or use ubiquitous filing databases to spread misinformation is a huge concern. Hopefully, before the fraudsters learn how to spell and write a good turn of phrase, the SEC shows it can quickly hunt them down.
