offshore Posted April 24, 2008 Report Share Posted April 24, 2008 In my "real" job, I pick up snippets of info, regarding company buyouts and the like. Today, I received some info on a company we deal with, who have not been travelling well, and their shares have plummeted. I have it on very good authority, (which I have verified from other areas) , that a multinational, will on Monday announce a takeover. There is no doubt, that with this announcement, the shares in the former company, (which were at $6.65, and have crashed to under $1, due to a perceived inability to finance some loans due, of $72 million)... will inevitably skyrocket, as the buyer is "bucks up" Insider trading? Or just jump in and take the profit? What would you do? Offshore PS. I had 2 hours this afternoon to decide, as it is a public holiday here tomorrow, and the announcement is Monday when the markets open. I would have had to arrange some quick liquidation of assets, or leverage against same! Final decision........take a deep breath....and forever berate myself when the (inevitable) happens. And maybe still feel 'honest"?? Quote Link to comment Share on other sites More sharing options...
PAMman Posted April 24, 2008 Report Share Posted April 24, 2008 I think that you shouldn't get involved youself as 1) you may get caught, or 2) you may hate yourself for being less than ethical. However I think you should pass this info on to us so that we can make a killing and buy more watches for you to drool over. Fell free to PM with the info, LOL. Quote Link to comment Share on other sites More sharing options...
ryyannon Posted April 24, 2008 Report Share Posted April 24, 2008 Don't get involved! It's both risky and unethical! If you want a sure deal, I've got this magnificent bridge in Manhattan that I'm selling for pennies on the dollar.... Quote Link to comment Share on other sites More sharing options...
assasi9 Posted April 24, 2008 Report Share Posted April 24, 2008 this may be the opportunity of a life time for you. i would jump on it if i were you. i wouldnt mind a tip either. Quote Link to comment Share on other sites More sharing options...
takashi Posted April 24, 2008 Report Share Posted April 24, 2008 hmmm sounds like email scam that I have been receiving lately... Proceed with extra caution. Quote Link to comment Share on other sites More sharing options...
rodwc Posted April 24, 2008 Report Share Posted April 24, 2008 The "snippets" , and company name could be posted here for us all to see just what, if anything transpires on Monday. Then we can all say you should have done this or that, as it is too late now to do anything. ( How wonderful hindsight is.) Quote Link to comment Share on other sites More sharing options...
Shundi Posted April 24, 2008 Report Share Posted April 24, 2008 As a finance major I were taught that you should NEVER, EVER do anything like this... Here's the thing: We were taught not to do anything because of the risk of getting caught, not the moral/ethical issues (says something about a private US education, eh?) If you are an outside consultant/company, try to step back and say "Since the share are at $1, would it be REASONABLE for me to invest in the company as a private citizen?" If the answer is yes, go for it. In fact, put the shares in your significant other's name, your name, it doesn't really matter. The burden of proof rests with the SEC (Or other regulatory agency) so unless you're making a HUGE sum of money (many millions), I don't see why it's a huge issue. Again, anyone could have told you company X was a good bet....it's just having the ability to jump in (that is, of course, if you are rock-solid on the financials and the assumption that this company will be brought out...) Another thing to consider is that many regulatory agencies look for people to short stock (I'll save those who don't know a trip to Google: Shorting stock is the practice of basically "borrowing" stock from someone else (with the promise to return the exact same amount (not value)) at a later date, selling the stock, and then buying back (and returning, or "covering the short") the stock.) This is basically done when one anticipates a drop in share price and is very risky as you only make money if the stock drops. If the stock goes up, you actually lose money as your price to cover exceeds your price to short. As such, governments characteristically pay a lot of attention to investors who short stocks (as this means they may be privy to Enron-esq information, poor projected profit, etc) rather than those who "hold long" and purchase the stock outright. I'd say if you are very concerned about the whole thing, don't stress yourself out, but if you want to make that buck and avoid anything, draw up an agreement with a friend or relative you trust and place the shares in their name. Quote Link to comment Share on other sites More sharing options...
Shundi Posted April 24, 2008 Report Share Posted April 24, 2008 Again, if it can't be legally traced back to you (memo, etc) then the government will probably not even know and certainly won't have enough evidence to do anything....make sure such purchases are few and far between though.... wouldn't want to do this sort of thing twice a year every year... luck can explain some things once, even twice, but not quarterly. Quote Link to comment Share on other sites More sharing options...
archibald Posted April 24, 2008 Report Share Posted April 24, 2008 I certainly have no moral authority to offer advice but I'm 100% certain of 2 things: 1)If you invest enough to possibly significantly improve your family's financial situation , you dramatically increase your chances of getting caught--which will definitely harm your familiy's financial situation. 2)Just by virtue of the fact you started this thread, you won't be able to enjoy any money you do make. If you were greedy you would have just skipped to the broker-dialing step. Quote Link to comment Share on other sites More sharing options...
rodwc Posted April 24, 2008 Report Share Posted April 24, 2008 luck can explain some things once, even twice, but not quarterly. OH, bloody, bugger , bum,.......... so your saying we can`t do this every week. Quote Link to comment Share on other sites More sharing options...
HauteHippie Posted April 24, 2008 Report Share Posted April 24, 2008 Do you know how the depressed company is being valued in the acquisition? Is it well above the current <$1/share level? I mean are you sure it's going to skyrocket? Either way, I wouldn't get anywhere near this one. Quote Link to comment Share on other sites More sharing options...
phaedo Posted April 24, 2008 Report Share Posted April 24, 2008 If it were not for the public holiday tomorrow hence we can't do anything about it, you could have let one of us that are not insiders know... put a bit into longer term options, if they have them, make a killing that way. Recently with one financial company in the states - was it Bear Stearns? Anyway,there was large activity on the $30 put options when the stock was at $60 - cost was around 30 cents per option. Once the stock hit $2 a share, those options are now worth $28 each. Not a bad weeks work for someone. Wish it was me, but wasn't. As to insider trading, never studied the Aussie market really, but you almost can't get caught back in NZ, a few years ago the PM at the time when the national airline was about ready to declare bankruptcy, announced on the news to shareholders not to sell. This was right at the time the airline was in negotiations with the government about a bailout. Lot more to it than that, but had that been the states, she would have been sharing a cell with Martha Stewart. As i said, not sure about enforcement over this side of the pond though. Quote Link to comment Share on other sites More sharing options...
Nanuq Posted April 24, 2008 Report Share Posted April 24, 2008 Friend, life is far simpler than this. 1) Tell the truth. 2) Be kind. 3) Act with integrity. Quote Link to comment Share on other sites More sharing options...
bwhitesox Posted April 24, 2008 Report Share Posted April 24, 2008 Phaedo, Telling someone about an upcoming deal so they can profit on it is also considered insider trading. Offshore, My advice is to stay clear of this as these type of transactions are always looked at and investigated. Quote Link to comment Share on other sites More sharing options...
offshore Posted April 24, 2008 Author Report Share Posted April 24, 2008 An interesting array of responses! Obviously, I am not moving forward on this info; is it because I have a conscience? Or is it because I have misgivings as to the nature and quality of the info, and don't want to take the punt? All I know, is that there was a little voice inside, that said clearly, "NO" ! It will certainly be interesting to view the chain of events come Monday, and then I can congratulate myself for either honesty or foresight, or recriminate with myself for failure to act! Offshore Quote Link to comment Share on other sites More sharing options...
HauteHippie Posted April 24, 2008 Report Share Posted April 24, 2008 An interesting array of responses! Obviously, I am not moving forward on this info; is it because I have a conscience? Or is it because I have misgivings as to the nature and quality of the info, and don't want to take the punt? All I know, is that there was a little voice inside, that said clearly, "NO" ! It will certainly be interesting to view the chain of events come Monday, and then I can congratulate myself for either honesty or foresight, or recriminate with myself for failure to act! Offshore Please do post the Monday results!! Quote Link to comment Share on other sites More sharing options...
rodwc Posted April 24, 2008 Report Share Posted April 24, 2008 Will you keep us up to date with the outcome? Love following a good tale. Quote Link to comment Share on other sites More sharing options...
bubu Posted April 24, 2008 Report Share Posted April 24, 2008 .Just by asking the question you are in a dilemma. What is most important to you? Money? Peace of mind? Will this significantly change your life? And if it does, is it worth the price you will pay (legal and personal values)? This is a very personal decision. Sleep on it and act with no regrets. Good Luck! Quote Link to comment Share on other sites More sharing options...
chris5264 Posted April 24, 2008 Report Share Posted April 24, 2008 All I know, is that there was a little voice inside, that said clearly, "NO" ! Quote Link to comment Share on other sites More sharing options...
subzero1 Posted April 24, 2008 Report Share Posted April 24, 2008 OK, so maybe this is a naive question, but what exactly makes acting on a tip like this wrong? I mean, I can see insider trading being wrong if you are in a position to manipulate company performance in order to cash in on stock holdings, but if someone simply happens to come into information that is legitimate, why not act on it? Quote Link to comment Share on other sites More sharing options...
JohnG Posted April 25, 2008 Report Share Posted April 25, 2008 (edited) Friend, life is far simpler than this. 1) Tell the truth. 2) Be kind. 3) Act with integrity. Amen brother. Insider trading is a serious crime. And it is not, as some believe, a victimless crime - all people who drive up market share prices when they trade on information not generally available to the public are taking money directly out of the pockets of other investors. If I buy 10,000 shares today at $1 instead of at $4 immediately after an important announcement, the windfall savings of $30,000 does not just come out of thin air - it is not "free" money. It comes out of the pockets of those who had to buy at a slightly higher price due to my premature intervention. It is irrelevant that this sum is spread over tens or even hundreds of thousands of buyers. If I steal a penny from one million people, it is still stealing. Edited April 25, 2008 by JuanG Quote Link to comment Share on other sites More sharing options...
rodwc Posted April 25, 2008 Report Share Posted April 25, 2008 Remember RENE RIVKIN not too long ago. Look where insider trading got him ! Quote Link to comment Share on other sites More sharing options...
subzero1 Posted April 25, 2008 Report Share Posted April 25, 2008 Well, but before you buy 10000 shares for $1, someone else already owns them, don't they? So you are not 'taking' money from the buyers at $4, but rather you are making the $3/share profit from the people selling, not from the people buying. Of course the people selling don't have to sell, since they own the shares and can sell, or not. If they held for a bit longer, then they would be making the profit when the price rose. In either case, it's either you, or the original holder of the stocks that stands to make the profit, and the buyer at $4/share would not make a profit regardless of whether you bought the stock at $1, or at $4. Again, I don't see the problem. How is that stealing? Quote Link to comment Share on other sites More sharing options...
subzero1 Posted April 25, 2008 Report Share Posted April 25, 2008 Let me clarify, that I'm not advocating that managers or other people in positions of power should be able to insider trade, because they have the power to manipulate the performance of the company to cash in. Kind of like not allowing an athlete to bet on their own games. But if you were, say a person that knew the star player had an injury which no one else knew, why not use that information? Quote Link to comment Share on other sites More sharing options...
eclipsewon Posted April 25, 2008 Report Share Posted April 25, 2008 (edited) Offshore and RWG Guest, It is all too easy to get caught in insider trading. I am in the securities business, and no, I am not a trader, but rather a planner (buy and hold). Let me try to educate those who may ever wish to trade on insider information. First, Insider trading is when a person with inside information, acts upon a "tip" or knowledge, that is not available to the public, or better said, non public information. When an average or worse yet, a person who has never traded stock, purchase a large number of lots (bundles of 100 shares), that triggers a red flag. Most investors will purchase blue chip stocks, when a purchase of a little known company is exercised, and you have little investment history or experience, that raises red flag #2. The next question, how long do you keep the stock? If the first two weren't enough evidence to charge on insider trading, this part here is your "finger print in the crime scene." Shortly after you have purchased the lots, you quickly turn around and sell those shares, in a matter of minutes, hours, days, or months, is how you can be spotted very, very easily. Now, if you don't think that the SEC hasn't already flagged the company, and the clearing firm doesn't have their "policeman" looking at this, you are a fool, and you will be busted. All the best. Edited April 25, 2008 by eclipsewon Quote Link to comment Share on other sites More sharing options...
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