Rampant Insider Trading in Buy-Out Deals Claimed

By IR Web Report Staff

IN ANOTHER potential blow to the credibility of US capital markets, the New York Times has published a report it says shows widespread unusual trading in advance of major buy-out bids being announced.

It is illegal to trade on inside information about an undisclosed merger, but the newspaper said that research conducted on its behalf by Measuredmarkets Inc. created “concern that illicit trading ahead of deal announcements is becoming a systemic problem.”

Of the 90 mergers valued at $1 billion or more in the past year, shares of 37 target companies (41%) showed unusual trading in the days and weeks before the deals were disclosed. People who bought shares during the periods of unusual trading stood to reap gains of upto 40%.

Measuredmarkets founder Christopher Thomas, a former analyst and stockbroker, told the Times that the analysis led to the conclusion that the unusual activities most likely indicated insider trading.

The newspaper said the Securities and Exchange Commission would not comment directly on the study.

Companies identified by Measuredmarkets included:

• Amegy Bancorp, the target of a $1.7 billion takeover by Zions Bancorp last September;
• CarrAmerica Realty, a REIT bought in March for $5.6 billion by Blackstone Group, a private equity firm;
• Dex Media, a directory publisher acquired for $9.5 billion by R. H. Donnelley in October;
• IDX Systems Corporation, a health care systems company bought for $1.2 billion by General Electric in September; and,
• Texas Regional Bancshares, bought for $2.2 billion by Spanish bank BBVA.

The Times reported that in each of the above five cases, the unsual trading happened when significant progress was being made in secret talks.

Company officials said they were unaware of unusual trading in advance of the deals and declined to speculate on reasons for the action, the Times said.

Read the New York Times article: Whispers of Mergers Set Off Suspicious Trading

Technorati Tags: Investor Relations

About IR Web Report
Since 2001, we have provided top investor relations departments with leading-edge independent advice based on global research of IR website best practices. IRWebReport.com is 100% independent of the website building, content and hosting industry. (Yes, that includes free lunches and swag!) More about us