October 12, 2013

Fabricated press releases

One of the first stocks I bought was Fingerprint Cards. The company markets, develops and produces biometric components and technologies that through the analysis and matching of an individual's unique fingerprint verify the person's identity (think the latest iPhone). I had no idea what I was doing, but a few days later, the company released a press release with information that made the stock increase by maybe 60 percent. This was many years ago, and Fingerprint has released several press releases since then. But today they released a big one. According to the press release, Fingerprint had been acquired by Samsung  for USD 650 million.

The market went crazy, the Fingerprint stock ($FING) increased with maybe 100 percent, the related companies stocks increased, and the larger tech-blogs Engadget and TechCrunch reported the story. This was a big story because it mean that the smartphone developer Samsung had decided to follow Apple and begin to install fingerprint censors in their own smartphones.

Fingerprint's press release.

Fifteen minutes after the press released arrived to the markets, Fingerprint itself released another press release. It said that the first press release was not submitted by the company and was completely fabricated. The company's website was registered today by an unknown person. Unknown exactly why, we will hopefully get the full explanation in the future, but someone had managed to submit a fabricated press release to Cision which is the company responsible for press releases. As a result, the Fingerprint stock and the stock of the related company, Precise Biometrics, began to fall after the fast gain.

The stock of Precise Biometrics

Cision argued how they had followed their procedures and has reported the events to the Swedish police. The stock market cancelled all trades in Fingerprint and Precise Biometrics - so no-one made any money from trading in those companies. Fingerprint reported that they have experienced outside attempts to hack their website, and they have reported all events to the police.

The questions is why would someone submit a fake press release?
  • The first alternative is that someone really stupid person tried to make money from his Fingerprint stocks. But why would someone believe that the stock market wouldn't cancel the trades?
  • The second alternative is that the person knew that the stock of Precise Biometrics would follow Fingerprint - which the company did as can be seen in the graph above. The stock market argued for some time if they would really cancel the trades in Precise Biometrics since the fake press release concerned another company. But in the end they decided to cancel all trades in Precise Biometrics.
  • Yet another reason might be that the person wanted to decrease the credibility of Fingerprint. Maybe an angry former co-worker, an angry shareholder, or a competitor? Fingerprint has a history of "strange" events related to the company, such as insider traders who have been caught.