When Thomas Meyer checked the stock price of his company one morning in early 2019, he almost fell off his chair. Shares of Auris Medical, a business he founded in 2003 that develops treatments for vertigo and hearing loss, were set to open up more than 50% in pre-market trading in New York. “We saw that the stock was up, but we had no clue,” he said, recalling that day. “But after some searching on the internet, it didn't take long to come across some investor forums – mostly retail investors – which we read and shook our heads in disbelief.” Investor forums were buzzing with news that Johnson & Johnson, one of the world’s biggest medical equipment and drug makers, was to acquire Auris in a US$3.4bn deal. But it was a different Auris. The rally in Auris Medical was a case of mistaken identity. The Johnson & Johnson statement should have been a clue: it clearly stated that the Auris it was buying was a privately held company. By definition, there were no listed shares. Still, trading in Auris Medical was frantic. Volumes that day were more than 10 times normal levels. “We knew that there was another Auris because they had reached out to discuss some questions around trademarks and how we could handle things,” said Meyer. “And we also received enquiries from hospitals seeking to buy their surgical robot. So we had seen some real-life confusion.” “But what happened on the stock market is really crazy – I cannot say it in other words – because it basically suggests that you have some computers or some monkeys running an investment process, picking up key words, not really reading what's coming out, simply pushing the buy key.” Surprisingly frequent Such cases of mistaken identity happen surprisingly often. Most recently Signal Advance, a seemingly dormant company that develops sensors, saw its shares surge almost 10-fold after Elon Musk told his followers to “Use Signal” – referring, of course, to a completely different company. Similarly, Zoom Technologies, which makes components for mobile phones, saw its shares rally in March after being mistaken for the video conferencing provider Zoom. Further back, Tweeter Home Entertainment, a bankrupt chain of home electronics stores, surged when Twitter said it was going public. Vadim Balashov and Andrei Nikiforov from the Rutgers Business School have researched the issue and found that about a quarter of stocks that share similar names or ticker symbols regularly see movements that are “hard to attribute to anything but investor confusion”. “We urge the regulators to study the issue and publicise the list of the tickers which are most often confused,” they wrote, adding that brokers could also introduce additional checks on their platforms for such tickers to ensure that investors – especially retail – are buying the right stock. No action Regulators, for their part, have little to no powers to prevent investors from unwittingly buying the wrong stock. IFR spoke to the Securities and Exchange Commission and the Financial Industry Regulatory Authority, but both declined to answer specific questions on the issue. While the SEC does have the power to suspend trading in stocks when it is in the public interest, it rarely uses that power in cases of mistaken identity. Zoom Technologies was a rare example of such a suspension, with the SEC pointing to the lack of any filings since 2016 as a primary reason. Most cases of mistaken identity are left to correct themselves. Some have been mistaken for many years: the FORD ticker belongs to Forward Industries, while the HP is assigned to Helmerich & Payne. Companies are under no requirement to put out statements to correct cases of mistaken identity. “While we do not maintain statistics on the frequency of these instances, we are aware of some instances in which retail investors have mixed
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