Avon shares get wild ride
Its stock spikes after a purported $8-billion takeover offer is filed with the SEC.
Avon Products Inc. said it had received no takeover offers Thursday after a purported $8-billion bid for the company filed with federal regulators led to three halts in the trading of its shares.
Avon said it can’t confirm the existence of the company calling itself PTG Capital Partners. Calls to the company, which claimed London as its headquarters in the filing, went unanswered.
Shares of Avon jumped as much as 20% after the filing appeared on the website of the Securities and Exchange Commission, a regulator that oversees stock markets. The stock gave up much of that gain shortly thereafter.
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 an apparently bogus document about a major company managed to get posted through the SEC came as a big surprise to many and raised doubts about the reliability of the service.
Robert Heim, a former lawyer at the SEC, said a handful of fake filings turn up every year, but they often involve companies that don’t exist. This one, which he described as a “blatant hoax,” was the first he’s heard of that moved the stock of 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 $18.75 a share to the board at Avon. That was almost triple the stock’s closing price Wednesday, an enormous premium.
The filing contained many red flags raising questions about its authenticity, including numerous typographical errors and two spellings of the company’s own name. That would be highly unusual in an authentic regulatory filing, which would receive close scrutiny from companies before being posted.
Another former SEC lawyer said using the agency’s filing service to push up a stock would be a brazen act, much like using unwitting police officers to pull off a heist.
“It’s not some bogus blog post that’s gone through 15 different countries and servers,” said Jordan Thomas, now a partner at Labaton Sucharow. “Any time you put out false information in the marketplace, you leave a trail that can be followed by law enforcement. This trail goes right through the SEC.”
The SEC would not comment Thursday.
The agency requires companies to make various kinds of disclosures through regulatory filings so investors can review them. Takeover proposals, quarterly financial reports and offers to sell stock to the public must be posted to the SEC’s filing service.
When making filings, companies must first submit papers with the agency with notarized signatures of executives and secure a code that allows them to make the filings electronically, said Heim, now at Meyers & Heim in New York. But the vetting, he added, pretty much ends there.
A bid for Avon, which has had serious struggles recently, would not be surprising and it has happened in recent years, lending initial credence to the filing. The company has reported three straight years of losses and declining revenue. It has eliminated jobs and taken other actions to cut costs.
In addition to typos and garbled sentences, passages in the filing matched almost word-for-word the language used by TPG Capital, a major private equity firm in Fort Worth, Texas, to describe itself on its website.
After shooting as high as $8 shortly after the filing was posted, Avon’s shares closed up 40 cents, or 6%, at $7.07.