Yikes. Fake press releases are one thing, but it’s another thing entirely when trusted news sources relay these stories as certifiable fact without doing any bit of source-checking whatsoever. That’s what happened to Google Inc (NASDAQ:GOOG) today, when a press release from Warwick, Rhode Island on the heavily-trafficked PRWeb appeared with the headline: “ICOA Inc. Acquired by Google for $400 Million.” The story broke around noon eastern time, and was picked up by the AP via Yahoo! Finance and TechCrunch, among others.
The press release has since been taken down, but thanks to the truth-seeking folks over CNET – who actually bothered to check the source of the news with ICOA’s top brass – we still have the transcript of the release. For a screenshot of the PR, here it is in its full glory, per a quick-thinking reporter at ZDNet:
Credit: Larry Dignan/ZDNet, original screenshot from “It’s fake: Google didn’t buy hotspot provider for $400 million“
No matter what our take on Google Inc (NASDAQ:GOOG) as an investment is, we won’t beat a dead horse about this story, but it’s worth mentioning that there is at least one notable grammatical error, possibly more – something that a major acquisition story wouldn’t let slip through if it were true. While it’s tempting to say that all is fair and well in the markets with the truth finally coming out, it is possible that this was intentional fraud, designed to manipulate the press for profit.
In a 60 minute period of trading in the middle of the day, shares of ICOA INC (PINK:ICOA) briefly touched $0.0004 a share – nearly four times their value one hour earlier – before falling back down to $0.0001, where they had previously been trading near. When looking at share volume, a similar phenomenon occurred, with the number of shares changing hands rising above 500 million over a five minute span at one point. Interestingly, volume began to pick up on the stock before the PR was issued, and some selling activity began to occur before the masses caught wind of the hoax – two clear signs that someone with foreknowledge was responsible for the inaccurate information, and was looking to profit from it.
As CNNMoney discussed quite nicely, ICOA CEO George Strouthopoulos said in an e-mail that “[s]omeone, I guess a stock promoter with a dubious interest, is disseminating wrong, false and misleading info in the PR circles.” The outlet also mentions that a simple back-of-the-envelope arithmetic would have discovered “the fake deal’s fishy side,” as $400 million from Google Inc (NASDAQ:GOOG) is far too expensive for a penny stock with a market cap under $1 million. Moreover, Strouthopoulos told Reuters that “[w]e are investigating the source, so far it originated from Aruba.”
While it’s very likely that the SEC will investigate this PR scam and hopefully, find those responsible, it should serve as a lesson for armchair analysts with a quick trigger finger to follow through with their sources before publishing erroneous content. After all, one would expect that an acquisition worth hundreds of millions of dollars would also come with an official announcement from Google Inc (NASDAQ:GOOG) and ICOA. Like it or not, our fortunes are tied to the chatter that surrounds the investing world on a day-to-day basis, which is why we’ve warned about potentially bogus stories in the past. Below is some of our past coverage. It’d probably be best to sift through it in order to be prepared going forward:
Let us know your thoughts on these issues in the comments section below.