It looks like the U.S. Securities and Exchange Commission has a new case to crack.
Shares of Avon Products Inc. zigzagged on Thursday after what first appeared to be a buyout offer seemed to have all the markings of a hoax.
Exactly three years after Coty Inc. dropped its $10.65 billion bid for Avon, an entity called PTG Capital Partners claimed in a filing with the SEC that it offered to buy all the company’s outstanding stock at $18.75 a share, or a total of $8.2 billion.
Avon’s stock jumped 11.4 percent to $7.43 on the filing. Shares later fell to a low of $6.88, and rebounded to close on Thursday at $7.60, or up 13.9 percent.
The direct seller quickly responded to the alleged bid, stating, “In response to an SEC filing made by an entity purporting to be named ‘PTG Capital Partners,’ Avon reports that it has not received any offer or other communication from such an entity and has not been able to confirm that such an entity exists.”
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The PTG name could be a play on the well-known private equity firm TPG Growth, an arm of TPG Capital, which acquired Avon Japan in 2010.
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Prior to Avon’s statement, investors became dubious after noticing the company referred to itself both as PTG and TPG in the filing on Wednesday. For instance, the typo-filled filing stated, “PTG Partners is a global private equity investment firm, focused on leveraged buyout, growth capital and leverage capitalization, investment in distress companies and turnaround situations. We are problem solvers, partners and pioneers. TPG’s approach to investing helps us to recognize value — or the potential for value — where other cannot see it.”
Also the price offered was seen as “ridiculous,” by a number financial watchers.
“The valuation implied by this alleged $18.75 offer per [Avon] share would have been rich and, given the currencies of Avon’s cash flows, too hard to structure as it could require raising debt in rubles, reals and pesos as a hedge,” wrote Consumer Edge Research analyst Javier Escalante in a research note on Thursday.
There were plenty of other red flags, said Calvin Silva, senior specialist at NASDAQ OMX. He noted that the company’s address — listed as 125 Old Broad Street in London — appears to be false and the phone numbers provided go directly to voicemail. He added that there are no other filings from the company listed on Edgar, the electronic submissions system for SEC filings.
The eyebrow-raising clues didn’t stop there. The law firm named in the filing doesn’t appear to exist, and a call to the number provided went straight to voicemail. Also, a Web site for a company called PTG Capital lists the company’s headquarters as Cairns, a city in Queensland, Australia, that is known as a destination for sailing and diving.
The motive for the seemingly false filing is unclear, but several financial observers said the move was likely intended to make Avon’s stock pop to exit a position. Regardless of motive, the act is illegal.
“If any of these trades are linked to a person who posted the filing it is a violation of securities law,” said Douglas Hand Jr. at Hand Baldachin & Amburgey, a New-York based law firm.
When asked if PTG was an actual company and if the SEC would take action against false filings, an SEC spokesperson said, “We are declining comment.”