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Oops, Yay! Nestor Inc Stock Shoots Up 1900 Percent on Google’s Acquisition of Nest
Maybe it's a sign of the Fast Food era that we live in where everyone is too busy to slow down, but in the wake of Google's $3.2 billion acquisition of Nest Labs, a maker of modern day digital thermostats and smoke alarms, investors flocked to gobble up stock of a company trading under the name "NEST," sending shares up a whopping 1,900 percent. The only problem? That wasn't the Nest investors were looking for.
The stock symbol NEST belongs to Nestor Inc., a company that provides automated traffic enforcement systems and services to state and local governments in the U.S. and Canada. It's a penny stock, which might have played a role in over anxious investors looking to score a big payday on Google's acquisition of Nest Labs.
Stock traders who bought shares of NEST thought they were investing in Nest Labs, which Google recently acquired for $3.2 billion.
Another explanation as to why Nestor Inc.'s stock penny stock suddenly shot up 1,900 percent is that savvy investors and/or those with inside knowledge of the deal may have anticipated armchair traders mistaking the two companies. In relation to that, Bloomberg's Matt Levine brought up an interesting question on Twitter.
"If you had advance knowledge of the Google/Nest deal, would you buy some Nestor, Inc. shares? And would that be insider trading?," Levine posted to Twitter.
The short answer to his question is yes, based on the misappropriation theory which "outlaws trading on the basis on nonpublic information by a corporate 'outsider' in breach of a duty owed not to a trading party, but to the source of the information," according to a Supreme Court ruling in US vs O'Hagan. Nothing in the misappropriation theory says the information must be tied to the security you trade.
In any event, the lesson here is the same one you likely heard grade school teachers preach again and again -- "Pay attention, class."
The stock symbol NEST belongs to Nestor Inc., a company that provides automated traffic enforcement systems and services to state and local governments in the U.S. and Canada. It's a penny stock, which might have played a role in over anxious investors looking to score a big payday on Google's acquisition of Nest Labs.
Stock traders who bought shares of NEST thought they were investing in Nest Labs, which Google recently acquired for $3.2 billion.
Another explanation as to why Nestor Inc.'s stock penny stock suddenly shot up 1,900 percent is that savvy investors and/or those with inside knowledge of the deal may have anticipated armchair traders mistaking the two companies. In relation to that, Bloomberg's Matt Levine brought up an interesting question on Twitter.
"If you had advance knowledge of the Google/Nest deal, would you buy some Nestor, Inc. shares? And would that be insider trading?," Levine posted to Twitter.
The short answer to his question is yes, based on the misappropriation theory which "outlaws trading on the basis on nonpublic information by a corporate 'outsider' in breach of a duty owed not to a trading party, but to the source of the information," according to a Supreme Court ruling in US vs O'Hagan. Nothing in the misappropriation theory says the information must be tied to the security you trade.
In any event, the lesson here is the same one you likely heard grade school teachers preach again and again -- "Pay attention, class."
