I wish to note that with every passing day the size of the damages Judge Pechman declared Jain owes Infospace resulting from his insider trading case grows from accreted interest. Last July I made the following post observing that the size of the award, as noted in various media reports, was growing over time and that the rate at which interest was accumulating appeared to be about $4 million/month. By last July the estimated size of Jain's judgment was at $247 mil. as reported in the Seattle Post-Intelligencer. If my conclusion about the rate of interest accumulation was correct, the award has now grown by at least another $24 million, which would bring it to around the $271 million area. (The article Kerry posted states that the first round of briefs in the appeals case is due in April, so I would guess that the case wouldn't get to the trial phase for perhaps another year and a half--certainly not this year.) If the lawsuit isn't resolved by this time next year, I would guess that the size of the judgment would grow by another $50 million, bringing the total owed to around $320 million. If the decision is upheld, delaying resolution is obviously greatly to Infospace's favor because it means more money. Jain is potentially paying a very steep price indeed for contesting the judgment. I also wish to note that my crude calculations are based on simple interest and do not take into account the very real effect of compounding, so if anything my guess projections probably understate the actual size of potential damages.
Here's my post from last summer:
Message 19101186
Note that the amount of interest Jain will potentially owe Infospace appears to be growing by around $4 million per month. When Judge Pechman announced her verdict in mid-May--about two months ago--the principle amount of the fine plus accured interest, as estimated by Jain's own lawyer in court filings at the time, was reported to be $237 million. In today's article in the Seattle Post-Intelligencer (http://seattlepi.nwsource.com/business/130396_jain11.html), the plaintiff's lawyer estimated that the amount of the fine plus interest was $245 million. So in two months, the amount of interest Jain would owe Infospace has grown by $8 million, or approximately $4 million per month. The longer Jain delays paying the fine, the greater the interest grows that he may be forced to pay later. Incidently, I have no idea by what calculation the the court awards interest against Jain on Infospace's behalf. He may appeal and attempt to delay the final outcome of the case as long as he can, but there is obviously a severe price for doing so and losing. We now have a crude basis for extrapolating how much more interest Jain will potentially owe Infospace with each passing year that he delays paying the court imposed penalty and it ain't pretty. If he delays payment by another year, the amount of interest he will potentially owe, based upon the current rate of interest accumulation, will grow by approximately $50 million, or around $1.50 per INSP share in cash--and that figure doesn't include the possible affects of compounding. Two more years and it looks like he'd wind up owing another $100 million in interest, increasing the total amount of the fine by 50% from its original level. Does anyone know what Jain's net worth is? If he delays long enough, at some point the size of the fine will exceed his personal net worth and he'll risk bankrupting himself. How far into the future would it take for that to happen? As it is, according to the article, if he does appeal, he may have to post as bond an amount equal to the current value of the fine: $245 million! Can he do it? Proceeds from his recent sales of INSP shares won't even cover the amount of interest his fine accumulates in just one month! |
