Fake Twitter Buyout Story Causes Shares To Briefly Surge Eight Percent

Bloomberg has confirmed that a news story that was published by a lookalike Bloomberg website earlier today was a fake. The story reported that social media company Twitter, Inc. (NYSE: TWTR) was in talks with banking representatives and close to a buyout deal. The news caused shares of Twitter to spike 8 percent in midday trade. MarketWatch also confirms that the news story and the site are both hoaxes. The perpetrators behind the site are unknown.

The site, which is now offline, was hosted at the address: http://www.bloomberg.market/.

A Whois search indicates that the site is registered to an entity in Panama.

Earlier this year, in May, shares of Avon Products Inc. (NYSE: AVP) underwent a similar fake buyout news-induced rally. American Airlines (NYSE: AAL) and Pairgain Technologies Inc. are other examples of shares that have been the targets of such operators. Often, schemes like this are designed to allow perpetrators to buy or sell at an unfair price.

Trading in Twitter shares has continued to be brisk. More than 40 million shares had traded hands at 2:30 p.m. Twitter’s daily average share volume runs near 22 million. Now that news has been disseminated that the buyout news was fake, Twitter shares are continuing to trade up $1.17, or 3.25 percent, at $35.94.

Twitter first issued shares in an initial public offering on November 7, 2013. Fellow social media company Facebook, Inc. (NASDAQ: FB), had seen its shares perform poorly after first offering them in 2012. Unlike Facebook, Twitter shares performed well in the months following the IPO, trading above $70 after being first offered at $26 just weeks earlier. Facebook shares have gone on to outperform the broad market, finding a bottom near $18 in late 2012.

Since late 2013 and early 2104, however, Twitter shares have under-performed the broad market, as well as other social networks, such as Facebook and LinkedIn Corporation (NYSE: LNKD), and sit close to 50 percent below all-time highs.

Twitter has a market capitalization of $24.80 billion. Thirty-seven analysts publish research on the firm. Their consensus earnings per share estimates are calling for growth of 100.00 percent and 500.00 percent for the current and coming quarters. EPS growth is seen coming in at 142.90 percent for the full fiscal 2015 year, and 97.10 percent in 2016. Analysts expect Twitter EPS to grow at an average annual rate of 69.10 percent over the next five years.

Twitter carries $1.60 billion in debt, giving it a hefty 43.42 percent debt to equity ratio. The company currently sits atop an impressive $3.56 billion in cash. Operating and profit margins are reported to be -35.01 percent and -38.27 percent, no doubt something that Chief Executive Officer Jack Dorsey is working to improve.

[Photo by Andrew Burton / Getty Images]