The bid for Avon that apparently was not

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NEW YORK (AP) — An apparently bogus offer to take over Avon Products that appeared on a regulatory website sent its stock on a wild ride Thursday and raised questions about the security of the online service, a trusted source of news for investors.

Shares of Avon jumped as much as 20 percent after the takeover offer appeared on the website maintained by the Securities and Exchange Commission, a regulator that oversees stock markets. But investors soon began to doubt the offer was real, and the stock gave up much of that gain.

A company calling itself PTG Capital Partners said in a document filed with the SEC that it would pay $8 billion for Avon, an enormous premium for investors in the cosmetic giant. But Avon said it had received no takeover offers, and couldn't even confirm if PTG exists. Calls to PTG, which claimed London as its headquarters in the filing, went unanswered.

The SEC's filing system is a trusted source for investors seeking important and timely disclosures from companies that can affect stock prices. The fact that a seemingly fake filing about a major company managed to get posted through the SEC came as a big surprise to many in the markets.

Robert Heim, a former lawyer at the SEC, said a handful of fake filings turn up every year, but they often involve companies that don't exist. This one, which he described as a "blatant hoax," was the first he's heard of that moved the stock of such a big company.

"The SEC has so many forms being filed, I don't think it can check every one," Heim said. "But I think they could do a better job acting as a gatekeeper."

The entity calling itself PTG said that it had submitted a bid of $18.75 per share to the board at Avon. That was almost triple the stock's closing price on Wednesday.

The filing contained many red flags raising questions about its authenticity, including numerous typographical errors and two different spellings of the company's own name. That would be highly unusual in an authentic regulatory filing, which would receive close scrutiny from companies before being posted.

Another former SEC lawyer said using the agency's filing service to push up a stock would be a brazen act, much like using unwitting police officers to pull off a heist.

"It's not some bogus blog post that's gone through 15 different countries and servers," said Jordan Thomas, now a partner at Labaton Sucharow. "Any time you put out false information in the marketplace, you leave a trail that can be followed by law enforcement. This trail goes right through the SEC."

The SEC declined to comment.

The agency requires companies to make various kinds of disclosures through regulatory filings so investors can review them. Takeovers, quarterly financial reports, and offers to sell stock to the public must be posted to the SEC's filing service.

When making filings, companies must first submit papers with the agency with notarized signatures of executives to secure a code that allows them to make the filings electronically, said Heim, who is now at Meyers & Heim in New York. But the vetting, he added, pretty much ends there.

A bid for Avon, which has had serious struggles recently, would not be surprising and it has happened in recent years, lending initial credence to the filing. The company has reported three straight years of losses and declining revenue. It has eliminated jobs and taken other actions to cut costs.

In addition to typos and garbled sentences, words used in the filing matched almost word-for-word the language used by a legitimate company, TPG Capital, a major private equity firm based in Fort Worth, Texas, to describe itself on its website.

The filing gave PTG's address as 125 Old Broad Street in London, a 26-floor glass building in the city's financial district. But PTG is not listed as a tenant on the building's website. The building's owner, investment firm The Blackstone Group LP, declined to comment.

After shooting as high as $8 a share shortly after the filing was posted, Avon's stock closed up 40 cents, or 6 percent, at $7.07.


AP Business Writers Matthew Craft and Joseph Pisani contributed to this report.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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