On Monday, Google announced that it's buying Nest Labs, a privately held maker of Internet-connected home controls, for $3.2 billion.
On Tuesday, Nestor Inc., a shell company that sold all its assets after collapsing in 2009, saw its stock, which has the ticker NEST, rise as much as 1,900 percent.
The shares, which had stood under a penny, peaked at 10 cents and closed at 4 cents Tuesday and again Wednesday. Clearly traders confused Nest Labs, which doesn't have publicly traded shares, with Nestor.
Editor’s Note: 18.79% Annual Returns . . . for Life?
When a takeover is announced stock traders frequently buy shares of the target company, as the buyer often pays a premium over the target's current share price and mergers are often seen as improving the target company's fortunes.
Matt Levine, a writer for the Bloomberg View, speculates that most of the buying of Nestor shares stemmed from computer algorithms that learned of the deal searching through news headlines.
Nestor isn't the first stock to benefit from mistaken identity surrounding a technology company.
After the microblogging service Twitter filed for its initial public offering in October, Tweeter Home Entertainment Group, a defunct home entertainment retailer, enjoyed an increase of 685 percent in its stock price,
The New York Times reports.
People who have held on to shares of Nestor since its 2009 demise probably received quite a surprise when the stock soared Tuesday.
"I have gotten calls from shareholders periodically asking me: What are my shares worth?" Stephen DelSesto, a lawyer who managed Nestor's business while it was in receivership, tells The Times.
"I've told them they're probably not worth the paper that they're printed on."
Nestor shares were trading at $0.02, down $0.01, Thursday midday.
Editor’s Note: 18.79% Annual Returns . . . for Life?
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