WeWork (NYSE: WE) stock jumped on Friday then slumped again. For there was a fake takeover bid for WE stock that went out over the wire. Carefully crafted and released in that slow period after close of normal business at the end of the working week. Postmarket trade on a Friday night is thin - so, prices move a lot given any specific change in trading patterns.
The point for us to take from this is that no, we cannot take even the newswires as being accurate information. If something looks ludicrous then it probably is ludicrous. Whatever is being said by the official information outlets. If we wish to trade on such silly news then as long as we know that it’s silly, is going to last for an hour or two, then that’s fine. But actually believing something that cannot possibly be true is one of those ways to lose an awful lot of money.
The specific was this that went out over BusinessWire: “Cole Capital Funds has sent a letter to the Board of Directors of WeWork, proposing to acquire 51% of the outstanding shares owned by minority shareholders at a price of $9.00 per share. They also seek representation on the company board. The financing for this acquisition is being discussed with City National Bank and JP Morgan. Cole Capital Funds aims to expand WeWork's offerings and attract a broader customer base, including armed forces veterans, traveling healthcare providers, traveling sales forces, and the marine industry. The proposed price represents a $7.89 per share premium over WeWork's last closing price of $1.11 per share as of November 2, 2023.”
No, ludicrous. Cole Capital’s not going to do something like that.
WeWork stock price from Google Finance
But given the thin markets of a Friday afternoon that WE stock price sure moved on it. For an hour or two until we got this spreading across the internet: “KILL A Proposal by Cole Capital Funds Seeks to Acquire 51% of all minority ownership shares of WeWork, Inc. for $9.00 per share in Cash. Business Wire requests that the press release NewsItemId: 20231103762883 “A Proposal by Cole Capital Funds Seeks to Acquire 51% of all minority ownership shares of WeWork, Inc. for $9.00 per share in Cash” be removed.”
Someone was still at work and released how insane that press release was. How fake that press release was in fact. Withdrew it - and, of course, the WE stock price follows.
We’ve talked before about WeWork’s reverse stock split. Then more recently, WeWork’s Chapter 11.
Exactly and precisely what happened is still open. But a very useful thought is that someone sent a fake press release which BusinessWire then published. That was enough to trigger the - very shortlived - WeWork stock price rally. We can assume that those who sent it were long WeWork stock and sold out during that rally. If they tried to make a few tens of thousands of $ they’ll probably get away with the market manipulation too. Trade is of such size that a small profit cannot be filtered out from the general ebb and flow. What’s more likely is that a large position was taken in short dated call options. And that will be found - we’d guarantee to you that the SEC is, right now, combing those trading records. When found so will the perpetrators. And we don’t fancy their chances of either keeping any trading profits or, to be honest, out of jail.
The lesson for us, here, as traders is that if a piece of news appears ludicrous then yes, it probably is ludicrous. Even if it’s on the usual wire services - silly things are silly, whoever is saying them.
