An apparently bogus offer to take over Avon Products that appeared on a regulatory website sent its stock on a wild ride on Thursday and raised questions about the security of the online service, a trusted source of news for investors.
Shares of Avon jumped as much as 20 per cent after the takeover offer appeared on the website maintained by the Securities and Exchange Commission, a regulator that oversees stock markets. But investors soon began to doubt the offer was real, and the stock gave up much of that gain.
A company calling itself PTG Capital Partners said in a document filed with the SEC that it would pay US$8 billion for Avon, an enormous premium for investors in the cosmetic giant. But Avon said it had received no takeover offers, and could not even confirm if PTG exists. Calls to PTG, which claimed London as its headquarters in the filing, went unanswered.
The SEC's filing system is a trusted source for investors seeking important and timely disclosures from companies that can affect stock prices. The fact that a seemingly fake filing about a major company managed to get posted through the SEC came as a big surprise to many.
Robert Heim, a former lawyer at the SEC, said a handful of fake filings turn up every year, but they often involve companies that do not exist. This one, which he described as a "blatant hoax", was the first he had heard of that moved the stock of such a big company.
"The SEC has so many forms being filed, I don't think it can check every one," Heim said. "But I think they could do a better job acting as a gatekeeper."
The entity calling itself PTG said that it had submitted a bid of US$18.75 per share to the board at Avon. That was almost triple the stock's closing price on Wednesday.