The announcement hit the news wires early Monday morning: A
brief news release claimed that Google (GOOG) had agreed to buy a little-known
Wi-Fi company named ICOA for $400 million -- quite a premium for a company
whose stock was trading for one-hundredth of a penny last week.
Tech blogs and even The Associated Press jumped on the story, announcing the deal as a sign that Internet giant Google is expanding into the business of running public wireless hotspots. Shares in the smaller company were soon trading at four times their previous value.
But the story wasn't true. Within hours, sources at both Google and ICOA had disavowed the deal. And the public relations firm that distributed the news release said it had turned the matter over to "the proper authorities" for investigation.
A spokesman at the Securities and Exchange Commission declined to comment Monday. But the episode had many hallmarks of a "pump and dump" scheme, in which someone may have sought to drive up the price of a little-known stock in order to make a quick profit.
"This was a hoax," George Strouthopoulos, CEO of Rhode Island-based ICOA, said in an email to this newspaper. "Someone, I guess a stock promoter with a dubious interest, is disseminating wrong, false and misleading info in the PR circles."
Strouthopoulos added that it appeared the false news release may have originated from the Caribbean island of Aruba. He said an editor at PRWeb, the public relations service that distributed the release, told him the release was submitted by someone with a phone number in the island's 297 area code and a generic email address ending in "gmail.com."
A spokesman at the PRWeb service couldn't be reached Monday. But the service, which is operated by Vocus, a public relations firm based in Maryland, said in a statement Monday afternoon that it had determined the release was "fraudulent."
"Vocus reviews all news releases and follows an internal process designed to maintain the integrity of the releases we send out every day," the agency said. It added that "identity theft" can occur "even with reasonable safeguards."
Google declined to comment on the release.
Viewed in hindsight, the two-paragraph statement bore indications of questionable authenticity: It contained at least two punctuation errors and some awkward language, while lacking any quoted statement from executives at either company. And while Google usually announces significant acquisitions on its corporate blog, there was no mention of the deal on either company's official website.
A reporter who dialed the Aruba phone number provided by Strouthopoulos reached a recording that said the number wasn't working. An email sent to the Gmail address bounced back with a message saying the account doesn't exist.
Gmail is Google's free email service, which anyone can use, but the company doesn't use the gmail.com domain for official communications.
While reporters who attempted to confirm the announcement quickly learned it wasn't true, a few news outlets that published it without confirmation found themselves issuing sheepish corrections later.
Shares in ICOA are traded on an exchange known as the OTC Bulletin Board, or Pink Sheets. Soon after the announcement was released, the stock rose briefly from $0.0001 to $0.0004, but it dropped back to $0.0001 after the deal was denied.
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