This just keeps getting better.
Over the past year, the shares of 41 percent of companies that received buyout offers showed abnormal and suspicious trading activity ahead of those deals’ public announcements, The New York Times reported Sunday.
I'm torn. At least some of the crooks are getting caught, but then again, it is in the New York Times...
Someone once told me the only thing worse than a godless Communist was a godless Capitalist. Without getting into a religious discussion, the point remains. Without a "moral compass" - for lack of a better phrase - business leaders can exhibit some of the worst behavior.
The newspaper said in the companies that were analyzed no particular news from an industry or sector — nor comments from a newsletter, columnist or blogger — had seemed to be influencing the stocks. The companies were not the subject of widely dispersed merger commentary during the periods of abnormal trading, nor did they make any announcements that would seem to explain the moves, the newspaper reported.
On the other side of the coin.
The Times said the Securities and Exchange Commission declined comment on the study but said that it had examined Measuredmarkets method and concluded that self-regulatory organizations like the New York Stock Exchange used more sophisticated techniques to spot insider trading.
“A lot of times the trading may look like something crazy, but you’ve got to have evidence,” said Walter Ricciardi, the SEC’s deputy director of enforcement.
One example:
Among the deals studied was Koch Industries Inc.’s $13 billion deal for Georgia-Pacific Corp., announced in November.
Koch’s board voted to approve the bid on Nov. 10. That day, volume in Georgia-Pacific shares rose 37 percent above its average for the year and the number of trades in its stock also rose, according to the Measuredmarkets analysis. The next day, a Friday, Georgia-Pacific volume increased 66 percent above the previous day’s level and company shares rose 5.5 percent over the two days.
The Atlanta-based company made no announcements either day, and the overall market was up 1.3 percent in that same period. The deal was announced on Nov. 13, a Sunday.
So, what's a stockholder to think? Well, you probably don't want to know the reality.
Based on the number of enforcement cases filed, the chances of being caught are small, the newspaper reported, noting that insider trading penalties often involve a negotiated settlement in which only the gains are relinquished.
Great.
Maybe the biggest problem is that, for most people, it's not at all hard to believe that this story is true. The corporate world is almost guilty until proven innocent.
Maybe the ranks of business schools are now filled with future business leaders who will place a higher value on that "moral compass" than on making a quick buck by any means possible.
Then again, their fathers probably paid for their high-priced education with their ill-gotten gains...
By am I cynical.
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