Nestor Inc. is a defunct shell of a company that once sold automated traffic enforcement equipment to state and local governments. Based in Providence, R.I., the company went into receivership in 2009, and all of its assets have been sold.
Its shares, which are not listed on any exchange, have been dormant for years, worth less than a penny each.
But on Tuesday, the stock woke suddenly from its long slumber to begin trading at one penny, jumping to a high of 10 cents a share. After a volatile day of trading, it closed at 4 cents.
So, what happened? The price movement may be a case of mistaken identity stemming from an acquisition announced this week.
Google said on Monday it had agreed to buy Nest Labs, which makes Internet-connected devices like thermostats and smoke alarms, for $3.2 billion in cash. Nest Labs is a private company based in Palo Alto, Calif.
After the deal was announced, investors rushed to buy shares of Nestor, apparently confused by the company’s ticker symbol, NEST. The stock continued trading on Wednesday, settling at about 4 cents a share by midday.
This isn’t the first time that a big deal on Wall Street has reverberated in the shadowy world of penny stocks. In October, after Twitter filed to go public, shares of Tweeter Home Entertainment â€" a defunct home entertainment retailer whose stock had barely traded â€" surged as much as 685 percent before trading was halted.
At this point, Nestor Inc. is not much more than a hollowed-out carcass. After the company folded in 2009, lawyers oversaw the sale of its assets to American Traffic Solutions, a company in Arizona. But while the assets were sold, the entity itself was not â€" leaving behind an essentially worthless stock.
“I have gotten calls from shareholders periodically asking me: What are my shares worth?†said Stephen F. DelSesto, a lawyer at Shechtman Halperin Savage who managed Nestor’s business while it was in receivership. “I’ve told them, ‘They’re probably not worth the paper that they’re printed on.’â€
The trading activity in Nestor set off a round of chatter online on Wednesday, after the pseudonymous blogger Kid Dynamite posted a stock chart. Matt Levine, a writer for Bloomberg View, pondered a hypothetical legal question.
