Avon shares closed at $7.18 on Monday, about 8% higher than its close of $6.67 on May 13, the day before the bid of $18.75 a share from a nonexistent British private-equity firm called PTG Capital was outlined in a filing with the Securities and Exchange Commission.
"Even though the offer was totally bogus, when these things happen -- whether the offers are real or not real, credible or not credible -- stocks often stay elevated for a period of time," said Linda Bolton Weiser, an equity analyst with B. Riley & Co.
"It's just that the offer itself highlights that a stock may be undervalued," she added. "It's up for debate whether it is or not."
Even with the gain, Avon shares are still down about 49% over the past 12 months, largely based on concerns over shrinking sales, potential debt covenant violations and the possibility of a higher tax rate.
The fake bid highlighted a lack of vetting in the SEC's filing process, which is largely automated and punishes those who abuse it rather than investing heavily in prevention. The SEC said it's reviewing the incident, and The Wall Street Journal has reported the FBI is looking into it as well.
The FBI would not immediately comment on Monday.
What investors find troubling about the false bid is that the very agency charged with protecting them was used to commit a fraud. Even though faked takeover bids have pushed up prices before, for companies ranging fro airlines to department stores, investors don't expect the same risk when a document has passed through the SEC, Weiser said.