Zynga Inc (ZNGA) Hit By Baidu Acquisition Fraud

A press release surfaced this morning claiming that, Inc. (NASDAQ:BIDU) was in talks to purchase Zynga Inc (NASDAQ:ZNGA). The Chinese search giant made a press release later this morning stating that the earlier news was a hoax, and, Inc. had has not agreed to purchase the social gaming giant.

Zynga Inc (ZNGA) Hit By Baidu Acquisition Fraud

The head of International Communications at, Inc. (NASDAQ:BIDU) responded to a request from the Wall Street Journal seeking information about the acquisition. The director, Kaiser Kuo, said that the press release was a fake, and, Inc. (NASDAQ:BIDU) had not agreed to buy Zynga Inc (NASDAQ:ZNGA).

The fake press release said that, Inc. (NASDAQ:BIDU) had agreed to purchase Zynga Inc (NASDAQ:ZNGA) for $10 per share. That’s an incredible premium, considering the company’s shares are currently trading at just $3. Zynga has benefited from momentum generated by its move into online gambling, but not enough to justify a tripling in value.

The news describes a serious problem with the way news is reported over the internet. Several prominent news organizations, including the prestigious Associated Press, reported the news as fact. Individuals looking to profit from the increase in Zynga Inc (NASDAQ:ZNGA) shares may have been responsible for the fake news.

Luckily if anybody did profit on the bad information, it was only at the margin. Zynga Inc (NASDAQ:ZNGA) shares hit a high of just $3.28 this morning before falling to $3.21 per share at time of writing. If the news had taken longer to debunk, or had involved a less ridiculous purchase price, the perpetrators might have managed to gain significant profits on a trade of Zynga Inc (NASDAQ:ZNGA) shares.

The news is not the first this week that demonstrates the inherent weaknesses in the kinds of instantaneous news that investors rely on to inform their moves on the market. In the wake of the Boston Bombing, The New York Post printed more than one article, one of which we rereported, that contained false information about the numbers of casualties, and the perpetrators.

Investors are heavily reliant on headlines, particularly for acquisition and regulatory news. Hackers can, it seems, quite easily plant fraudulent stories on websites that claim to only post PR reports from companies.

Though it didn’t happen today, those stories can easily change the price of stock, and can be responsible for large discrepancies in pricing.