A New Hunt Is On for Insider Trading
<<For many investors and employees, the most galling examples are those in which executives clearly failed but walked away with millions.
Few companies offer a sharper contrast than Ariba, a software company in Sunnyvale, Calif., near the center of Silicon Valley. The company went pubic in June 1999 amid the Internet mania, promising to create Net marketplaces where companies could buy and sell goods. When analysts talked excitedly about the future of "B2B" — business-to-business electronic commerce — they often mentioned Ariba.
Ariba's stock soared above $150 in early 2000 and, after falling more than two-thirds, recovered to an all-time high of $168.75 that September, as its executives offered an enticing vision of the future.
"We're seeing an incredible amount of demand out there," Keith J. Krach, the chief executive, said in April 2000. Three months later, he told Dow Jones Newswires, "This marketplace is red hot." And in October of that year, he said, "Profitability is imminent."
It never arrived. Ariba's software had bugs, and its B2B marketplace attracted fewer users than the company had projected. When it announced a newly aggressive accounting method in 2001, investors worried that the company was exaggerating sales, and the stock fell sharply. The company has laid off hundreds of workers, and in its most recent fiscal year reported a $2.7 billion loss.
But Mr. Krach and his colleagues have done well. In 2000 alone, as he was making some of his optimistic pronouncements, Mr. Krach sold $167.4 million worth of Ariba stock, according to Thomson. Over all, insiders have sold more than $850 million of stock since the start of 2000.
"I find it appalling," said Glenn Luksik, a former Ariba shareholder from Columbus, Ohio, who is a plaintiff in a class-action lawsuit filed against the company last year, related to Ariba's initial public offering.
"Has big business always been like this, with all of these inside deals?" Mr. Luksik asked.
Lauren Ames, an Ariba spokeswoman, said that most of the executives who sold large amounts of stock no longer worked at the company, and that Ariba was a much stronger company today than a year ago. Mr. Krach, now chairman, was unavailable to comment, Ms. Ames said.
Ariba's case may be extreme, but there appear to be dozens of cases in which insiders legally sold millions of dollars of shares shortly before the stock price sank.
nytimes.com |
