Claimed $400m Google buyout is fake, ICOA boss warns
SEC called after hoax press release sends shares spiking
It was a lousy start to the post-Thanksgiving weekend for the management of US hotspot provider ICOA after the company fell victim to what looks like a classic pump-and-dump stock scam.
On Monday morning a press release was posted on PRweb announcing that Google was splashing out $400m to buy the firm, which operates 1,500 Wi-Fi hotspots across the US, including in high-value areas such as marinas and universities.
The story caused heavy trading in the firm's shares, but CFO Erwin Vahlsinghas confirmed to The Register that the story isn't true.
"It's a false release," he told us. "The SEC has been notified."
ICOA is firmly in the penny share category, with shares trading on the OTC Pink sheets for fractions of a cent. Nevertheless, the press release more than quadrupled the share price, and at its peak over 500 million shares were traded, indicating that someone made off with at least $200,000 in profit.
That the badly spelled two-paragraph press release announcing the deal caused such a flutter can't just be blamed on minds being slowed by the nation's turkey coma. The acquisition does make a certain amount of sense, given that Google has been active in expanding internet access and ICOA has been talking about buy-out negotiations for a while now.
Buy, buy, buy! No sell, sell, sell!
The case also shows the difference in economics that the internet has made to this kind of scam. When pumping and dumping shares was first tried out, it was a risky and expensive business – there were phone banks of people to hire to sell the stock, who needed housing and paying off. Nowadays all you need is a press release and a few million spam emails, and twitchy stock traders will do the rest.
Google isn't saying anything on the matter so far, but sources in the company confirmed the deal wasn't on and ICOA wasn't even on its radar. Whether the SEC investigation yields any culprits remains to be seen. ®