There has been much speculation over potential investors in Avon during recent months, but none appears to be wilder than claims that the media mogul was about to step in to save the struggling cosmetics giant.
Avon Products' shares surged on the New York Stock Exchange during early trading on Wednesday, but soon fell again when a spokesperson for Oprah Winfrey stated that “this is not true” in an email to CNBC.
Oprah's Weight Watchers investment
Although stock continued to trade about 6% higher at the close of the trading day, investors’ hopes were dashed that one of the world’s richest women would be able to step in save a company that last year saw sales fall by 20% share price drop by 60%
Giving some credibility to the Oprah rumor was the fact that she took a 10% stake in Weight Watchers back in October, a move that has led to stock prices in the company rising by 280%, thanks to her credibility with her global audience and fan base.
The investment has not only restored the faith of investors in Weight Watchers, it has also stirred the interest of Weight Watcher’s customers, with the company reporting a significant increase in traffic to its website, translating into a higher rate of new business.
History repeating itself
Although the source of the Oprah hoax is still to be determined, this is not the first time in recent months that Avon has been the subject of false investor speculation.
Back in May rumors were circulated that Avon was about to be taken over by an undisclosed private equity investor, resulting in a big hike in the company’s share price.
However the rumors proved to be false and resulted in the US Stock Exchange Commission suing a Bulgarian trader who filed fake documents purporting to the takeover bid.
A lawsuit was filed by the SEC last Thursday, naming 37 year-old Nedko Nedev, a resident of Sofia, Bulgaria, as the suspected culprit behind three fake takeover bid filings.
SEC sues Avon investor
Nedev is also said to be responsible for filing two other similar takeover bids, all designed to boost his stakes in the businesses, through ‘contracts for difference’, which aim to boost share prices between a time a share contract is opened and when it is closes.
Nedev filed the fake Avon takeover bid under the name PTG Capital, identifying the company as being based in London, when he was actually operating out of Bulgaria.
The bogus offer, made on May 14, outlined that the private equity company would buy shares at $18.75, more than $11 over the trading share price at the time of the filing and one that valued the company in excess of $8.2 bn.