Did anyone read the fine expose on Insider Trading in today's Globe and Mail? It was a detailed account of various takeovers that have occurred over the last year or so and how shares in the target company shot up before the announced buyout. A number of high profile takeovers were mentioned.
That article brought back memories of Newbridge's takeover of Stanford this summer. At the time, I suspected that insiders of either Newbridge or Stanford, and possibly both, had used material information about the impending takeover to their advantage. I decided to examine trading in the stock of Stanford a little closer, and it clearly reveals that something was stirring well before the official announcement.
If you look at the period where talks were going on, and the dates where the due diligence started (mid-March), and look at how the stock traded just before this date and how it traded after the DD started, it's obvious that something was going on. In early March, the stock of Stanford was in decline, then suddenly it reversed course on heavier than normal volume. This reversal coincides with the beginning of due diligence on the part of Newbridge. Just before the start of due diligence, Stanford was trading at about $12.50 per share and the stock was falling. As due diligence got under way, the stock suddenly shot up on above average volume. When the deal was finally announced on June 22, Stanford's stock was above $25 per share, a stunning appreciation of about 100%. There is nothing fundamental that could account for this sharp rise in Stanford's share price.
The conclusion is that someone, somewhere, used their knowledge of the impending deal to profit from insider trading. The question is -- who? |
