Rumors of Our Acquisition Were Greatly Exaggerated

Various people are alternately scolding or feeling scolded about the falseness of month-ago rumors that not-yet-launched photo recognition service Riya is being acquired by Google.

Relax, people.

Fine, Riya wasn’t bought. And fine, the initial accounts that an acquisition was impending have turned out to be incomplete.

But so what? That sort of thing — rumors of an impending acquisition that then doesn’t happen — is commonplace in the capital markets. Matter of fact, it is one of the essential information-discounting mechanisms by which markets and prices incorporate data. Sometimes that data is correct, sometimes it is incorrect.

Telling people to keep quiet until they have all their info-ducks lined up does, however, show a lack of sophistication about how capital markets work. Because acquisition rumors, large and small, can play many roles. Sometimes it is the way that senior employees or investors register unhappiness with a CEO. Sometimes it is the way that investors try to get their company “in play”; sometimes it the way people get their company out of play. Sometime it is the way CEOs jack the price of their company. Sometimes it is a kind of campfire story by which people talk about what is happening in the market. And sometimes, of course, it is just someone with some juicy data who can’t wait to share it.

Whatever, but when you hear a rumor ask yourself not just about the lottery cult of Silicon Valley, but about who wins, who loses, and who might be promoting this info-bit to bloggers and journalists. Who does it benefit? Who does it hurt?

Capital markets rumor-spreaders almost never have all (or even many) of their facts right. They do, however, play a role, as they did in the Riya case, where rumor-spreaders had the essentials right: Pace the recent “flipping startups” discussion, a tiny revenue-less company that hadn’t yet shipped a product was apparently having discussions with Google (and, as has now been disclosed, with Microsoft as well), and those conversations were almost certainly not about Sergey and Munjal’s respective fondness for the trapeze.


  1. BTW, the Twain quote doesn’t use the adverb, it is: “Reports of my death are exaggerated.”