Avon share price jumps 20% on hoax takeover bid

on May 15, 2015

Avon Products’ (NYSE:AVP) share price spiked as much as 20 percent overnight after an evidently nonexistent firm, incorporated in a remote archipelago in the Indian Ocean, offered to buy the world’s largest door-to-door cosmetics group for almost three times its current market value.

The purported acquirer, which identified itself as PTG Capital Partners, said in a US Securities and Exchange Commission (SEC) filing yesterday that it would pay $18.75 a share for Avon. That would value the New York-listed group at $8.15 billion, compared $2.90 billion at the close of trading on Wednesday.
The filing contained numerous grammatical errors, and the company also referred to itself as TPG in places. TPG, a prominent private equity firm in Fort Worth, Texas, said it is unrelated to PTG. Attempts to reach contacts listed in the document — a law firm named Trose & Cox in Texas and PTG itself in London — were unsuccessful. Furthermore and somewhat mysteriously, PTG was not registered as an occupier of the London offices at 125 Old Broad Street, the address to which it told interested parties to write for further information.
Soon after the filing broke, Avon said in an email statement that it “has not received any offer or other communications from such an entity, and has not been able to confirm that such an entity exists.” The New York Stock Exchange (NYSE) declined to comment, while the SEC said: “Under the federal securities laws, filers are responsible for the truthfulness of their filings, and they are subject to enforcement actions when they are false or misleading.”
The apparent hoax takeover bid underscores a weakness in the SEC’s Electronic, or “Edgar”, filing system. It is relatively easy to set up a fake account and make fraudulent filings directly to a legitimate firm’s cache of disclosures. To make filings, one only needs to provide Edgar with a street address and a document signed by a notary, according to an Edgar user’s manual published by the SEC.
Trading in Avon shares were halted three times yesterday because of wild market action following the phantom offer. The stock peaked at $8 and ended six percent up at $7.07 even after many traders doubted the veracity of the bid. About 69.5 million shares changed hands, mostly after news of the filing broke, on the stock’s busiest day since 20 March.

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