2009-10-03 04:41:00
IMAX, LOCM Rise (Temporarily) Due to Phony Press Releases
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For the second time this week, somebody has issued a fake press release that has "reported" on the details of a "transaction" that actually never existed in the first place.
Earlier in the week, somebody issued a press release stating that Disney had agreed to purchase the IMAX Corporation for about $1.5 billion dollars.
This $1.5 billion dollar purchase price would have represented a large premium for IMAX, and the shares (temporarily) traded higher as a result of the release.
The press release (which ultimately turned out to be a fake), said that "Imax would appear to be a good fit for Disney", and that the "stock expected to open up at minimum $15 - $17 per share".
Alarm bells went off for many people due to the poor grammar that was contained in the press release, as well as the declaration that the stock was expected to open up at a certain price.
Representatives from Imax quickly declared that the news was bogus, but this didn't stop some traders from sending shares of IMAX up over 5% in premarket trading.
Later in the week, another fake press release made the rounds, this time declaring that Microsoft had purchased Local.com (LOCM) in a $200 million dollar transaction.
Shares of LOCM jumped in afterhours trading on Thursday afternoon after the phony press release was issued. LOCM company officials issued their own press release on Friday morning, saying that the "buyout" was 100% fake.
This isn't the first time that something like this has happened.
Back in the summer of 2000, Mark Jakob, a former employee of Internet Wire, sent out a press release that stated that Emulex was under investigation by the SEC, and that they were restating previous earnings.
The stock traded as low as $43 (from a previous close of $113), before the stock was halted and the press release was declared a fake.
Jakob ended up banking about $250k from the fraud, only to be arrested a short time later.
Not only did Jakob have to return his "ill-gotten" gains, but he also was sentenced to 44 months in jail and forced to pay an additional $103k in fines.
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In the case of the IMAX and LOCM press releases, somebody appears to have either gotten access to a press release service, or they run one of their own.
Somebody has obviously succumbed to temptation, believing that they can load up on shares of IMAX and LOCM, issue fake press releases and then sell into the wave of buying pressure.
A small-time fraudster, who is so blatantly obvious about their attempted manipulation of the market, won't escape the clutches of the SEC for very long.
I wouldn't be surprised to hear of news of an arrest in this matter early next week.
Sources: WSJ.com - Imax Says Disney Rumor "Baseless" and "False"
Investors.com - Local.com says Microsoft merger report is false
Filed under: Stock Market Scandals
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