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Insider trade on Splunk acquisition?

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Re: Insider trade on Splunk acquisition?

#11

Post by jldugger »

function_seven wrote: post #9
arcticbull wrote: post #4

Earlier quoted context omitted.

Knowing about the acquisition puts you in possession of material nonpublic information. It's unlawful to trade on the basis of such information whether you work at the company or not. Passing it along is 'tipping' and acting on it is still 'insider trading.'

My understanding is that having material nonpublic information is not—in itself—enough to make a trade illegal. As long as you're a true outsider, and didn't get that info using illegal means, you can trade on it. Maybe this whale was tracking tail numbers, drove down to the executive airport, and saw that Cisco's chief M&A guy had a huge grin on his face as he stepped onto the plane. (Okay, I doubt that highly, but…

Cisco and Splunk are both HQ'd in SF. If they were at the airport, it was coming back from Jackson hole or something.

The real trouble with 'maybe they were legit outsiders' is the options expired specifically today, which means you need to know _when the announcement_ is to profit.

Re: Insider trade on Splunk acquisition?

#13

Post by [deleted] »

kylecordes wrote: post #8
arcticbull wrote: post #4

Earlier quoted context omitted.

Knowing about the acquisition puts you in possession of material nonpublic information. It's unlawful to trade on the basis of such information whether you work at the company or not. Passing it along is 'tipping' and acting on it is still 'insider trading.'

I am far from an expert - but think this is essentially true - but does not universally imply you can't trade on the info. Example: You watch the front door of an office building. From seeing who walks in, you ascertain with 99% probability that companies X and Y are working on some kind of big deal. If you're just a random person with no relationship to those companies, you can trade on this information. (Not legal…

[deleted]

Re: Insider trade on Splunk acquisition?

#15

Post by [deleted] »

function_seven wrote: post #9
arcticbull wrote: post #4

Earlier quoted context omitted.

Knowing about the acquisition puts you in possession of material nonpublic information. It's unlawful to trade on the basis of such information whether you work at the company or not. Passing it along is 'tipping' and acting on it is still 'insider trading.'

My understanding is that having material nonpublic information is not—in itself—enough to make a trade illegal. As long as you're a true outsider, and didn't get that info using illegal means, you can trade on it. Maybe this whale was tracking tail numbers, drove down to the executive airport, and saw that Cisco's chief M&A guy had a huge grin on his face as he stepped onto the plane. (Okay, I doubt that highly, but…

[deleted]

Re: Insider trade on Splunk acquisition?

#17

Post by xyzelement »

I don't know if this is genuinely suspicious or not. Is buying 20K of options an unusual thing? Or is this something that happens regularly with options expiring worthless or with a small gain - and it just happened to hit big this time?

IE "someone bought a lottery ticket and won" - interesting to know if they play the lottery every other day (and don't usually win?)

Re: Insider trade on Splunk acquisition?

#18

Post by kortilla »

arcticbull wrote: post #4
YeBanKo wrote: post #3

Is there any legit way in which whoever made this trade could have got a wind of a potential acquisition without relying on inside knowledge?

Knowing about the acquisition puts you in possession of material nonpublic information. It's unlawful to trade on the basis of such information whether you work at the company or not. Passing it along is 'tipping' and acting on it is still 'insider trading.'

No, your intuition is wrong here. Otherwise you couldn’t do private research. This definition varies and is true maybe in some European countries(???) but not the US.

Re: Insider trade on Splunk acquisition?

#19

Post by arcticbull »

function_seven wrote: post #9
arcticbull wrote: post #4

Earlier quoted context omitted.

Knowing about the acquisition puts you in possession of material nonpublic information. It's unlawful to trade on the basis of such information whether you work at the company or not. Passing it along is 'tipping' and acting on it is still 'insider trading.'

My understanding is that having material nonpublic information is not—in itself—enough to make a trade illegal. As long as you're a true outsider, and didn't get that info using illegal means, you can trade on it. Maybe this whale was tracking tail numbers, drove down to the executive airport, and saw that Cisco's chief M&A guy had a huge grin on his face as he stepped onto the plane. (Okay, I doubt that highly, but…

I initially thought this wasn't the case, but did some research - so for posterity: if you overhear the information in a public setting you may be ok. It depends on whether you have a duty of trust, apparently, and personally I'd run it by a lawyer before firing up Robinhood. [1] Although (1) IANAL and (2) you may still be answering difficult questions if you structure your trades the way this individual did.

[1] https://money.com/insider-trading-examples/

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