Fake Website Fools Some Into Believing That Twitter Was Going To Be Acquired
Traders were tricked yet again on Tuesday afternoon after somebody created a fake website (called bloomberg.market) to circulate a false rumor that Twitter, Inc. was going to be acquired for $31 billion.
The site, which was made to look like Bloomberg.com, was created just a few short days ago. This didn't stop some traders from jumping into Twitter after the "story" was released, however, as shares of TWTR jumped from around $37 to $38.50 over the course of just a few moments during late morning trading.
After it became apparent that the story was false, share of Twitter quickly returned to $37.
According to reports, a "large buyer" bought 12,000 near-dated call options in Twitter just as the report started making the rounds. These call options were betting that shares of Twitter would be trading at over $37 by Friday.
There are three possibilities when it comes to these options:
1) The fraudster purchased their options to profit from the expected move in Twitter
2) Some unfortunate trader or traders saw this report and decided to buy a large amount of call options (the options also could have been bought using some sort of computer program that scans social media and news for actionable trading ideas)
3) It was pure coincidence.
The Securities and Exchange Commission will certainly be looking into the activity and the buyer will have to explain their actions.
This isn't the first time that a fraudster has done something like this.
One of the more memorable cases occurred during the "dot com boom" when somebody circulated a false press release that stated that Emulex was under investigation and would be restating their earnings. The stock plummeted as a result, netting the fraudster a large sum of money over the course of just a few minutes. He was eventually caught, however, and was sentenced to jail.
Filed under: General Knowledge