It appears that PRWeb, a public relations outfit that allows companies to distribute news releases to media outlets such as newspapers, websites, etc., distributed a report that Google was acquiring ICOA, a small WiFi company, for $400 million. The report was false.
The fake news of the acquisition was picked up by several news outlets, which often will reprint news releases without modification, and spread throughout the worlds of technology and finance. An irony was that one of the propagators of this false report was Google. The report was prominent on its own Google News service, which itself is a clearinghouse for news organizations.
While it’s not clear at this time why someone created a false report on this acquisition, one can imagine that there might be a financial motive. For those unfamiliar with the workings of the stock market, a company such as ICOA sells pieces of its company as shares to the public. The total value of these shares represent the value of the company. If the company is to be acquired for, say $400 million, the value of the owned shares of the company would reach at least that amount. In other words, each share of the company would increase dramatically once there was news of an impending acquisition. If someone held these shares before a company was being acquired, it could presumably make all the investors rich because their shares have increased in value.
Someone could presumably craft a fake news release and distribute it through PRWeb for a small fee. PRWeb will then distribute the news release to search engines, such as Google, and to news wire services, newspapers, and other news websites. Once news outlets around the web publish the fake news about the acquisition, it could set off a frenzy of investors buying the stock which will drive up the price. (The stock market works like an auction, where the most recent price of a share is the value of the share.) If the person who crafted the fake news report had shares of the company or had conspired with someone who held those shares, that person could sell his/her shares for a greatly inflated price and pocket a nice sum of money.
This practice is pump and dump. One pumps up the company by spreading positive news, and then dumps shares of the company once the news inflates the value of the shares. Because of the speed at which information can spread on the World Wide Web, the fake news of the acquisition can become the story, without allowing reporters enough time to verify the story, and it could drive up the share price very quickly. This allows the pumper of the company to dump the shares in a very short amount of time.
The manner in which the fake news release hit the web appears to be a case of humans surrendering to the almighty algorithm. It appears that PRWeb did not verify the story with Google or ICOA. Google’s algorithm does not appear to verify sources, either. And once this news began to appear on websites for major newspapers, via the Associated Press, the story was taken as true and became actionable information for investors.
(Image from Wikipedia.)