Twitter shares rise sharply over fake acquisition report

Twitter shares rose sharply for a brief period yesterday over a fake report resembling a Bloomberg story that suggested the social media company had received an acquisition offer.

The stock shot up nearly 8 per cent initially after the story at bloomberg.market, rather than bloomberg.com, said the micro-blogging network was working with banks after receiving a $31-billion takeover bid.

The report was denied by both Bloomberg and Twitter.

Investors rushed to buy Twitter shares on the initial report as takeover speculation had swirled around the company in recent months. The fake story comes after a false acquisition offer that sent Avon shares vaulting earlier this year.

According to ICANN, which oversees internet domain databases, the bloomberg.market domain was registered on Friday by an individual who listed an address in Panama.

The Securities and Exchange Commission declined to comment on whether it would investigate the report.

Twitter shares shed some of the gains after Bloomberg said the report was false, though, it held over three 3 per cent higher into Tuesday afternoon.

Bloomberg spokesman Ty Trippet said the story was ''fake and appeared on a bogus website that was not affiliated with Bloomberg.''

The site was no longer functional in the afternoon, and a message on it read ''This account has been suspended.''

According to Robert Heim, a former lawyer at the SEC, these kinds of schemes would probably persist because news spread so fast over social media and traders had to react so quickly, AP reported.

''I think this is a modern form of the pump and dump,'' he said. ''Instead of having a room full of cold callers calling up investors and pitching a stock, now people can set up a website in a day or so, often on their own, and publish a fake news story to be able to trade on the securities before the truth comes out.''

In a pump and dump scheme, a stock's investors mislead people into buying shares with fake news or purported insider information.

The share price rises with people getting interested and the schemers sell their stock at a profit. The shares then fall and the duped investors lose money.

Heim added, automated trading programmes that acted on the basis of increased trading volumes and prices could magnify the effect of the scams.