In the Google Legal building, the department that dealt with acquisitions was behind a locked door. Most badges did not open it.
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Insider trade on Splunk acquisition?
111–120 of 371 posts
Re: Insider trade on Splunk acquisition?
#112Earlier quoted context omitted.
>Is that considered insider trading? Yes.
Legally speaking then, it's best to never make trades on any company that you currently or have previously (because you could still have friends that work there) worked for?
If you are in the USA, rule 10b5-1 of the SEC [1] "allows insiders of publicly-traded corporations to set up a trading plan for selling stocks they own". Despite the description in the link, as I understand it you can also buy more stock as long as you announce it well in advance. It is explicitly meant to allow people who cannot avoid having non-public information about a stock to still trade in that stock. By forcing them to publicly announce well in advance what they intend to trade and when, the idea is that they then cannot do the short term high risk trading that you need to really profit from insider trading.
Re: Insider trade on Splunk acquisition?
#113Do they keep the money if they get caught? If it’s the SEC, they directly can’t send someone to jail, only fine them? Is that right?
i'm also curious if the counterparty gets to keep the $22k?
Re: Insider trade on Splunk acquisition?
#114Where's the line for insider trading on something like this? Say you were a low level Splunk or Cisco employee and you had a hunch the acquisition was going to close sometime this week (you're not working on the deal, you just heard through the grapevine that it's happening). Is that considered insider trading?
> Is that considered insider trading? AFAIU, the use of material non-public information always qualifies as insider trading. It does not matter how you got it, and it does not even matter if you work at the company. See https://www.investopedia.com/terms/m/materialinsiderinformat...
> It does not matter how you got it
Well, it sort of does. In fact, that's almost all that matters.
Insider trading is all about obligations. If someone who had the obligation to keep the info secret gave it to you and then you went and traded on it, then yes, you're breaking the law.
But if, say, you figure it out by accidentally stumbling on a draft Splunk web page that has a Cisco copyright buried in the code, you don't have any obligation to not trade on that.
It's the same information but the only thing that's different is how you got it. The company and its shareholders are the ones who are harmed by insider trading, so if you're entrusted with the info and trade then you're basically breaching your duty to the company (or the chain of people who shared the info with you). But if the company fucks up and leaks the info then you don't have any obligation to not use it.
Re: Insider trade on Splunk acquisition?
#115Earlier quoted context omitted.
As in go to jail? I’m pretty sure yes.
You must be new to the United States. Only the poors go to jail (except in the most extreme cases like Epstein, and it still took them 20+ years to do anything to him.
Just note it is most likely the person who did this was poor compared to whoever was on the other side of this trade.
Re: Insider trade on Splunk acquisition?
#116Earlier quoted context omitted.
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] htt…
There is precedent that even if you are in possession of info that will eventually become public, which you then trade on, you can still be convicted of insider trading. For example, a Printer for Business Week and a Stock Broker traded on pre-publication information and were convicted of insider trading. https://corporateinsiderstrading.wordpress.com/2012/02/01/bu...
The printer has an obligation of trust. Someone overhearing your loud phone conversation in public does not.
Re: Insider trade on Splunk acquisition?
#117In the Google Legal building, the department that dealt with acquisitions was behind a locked door. Most badges did not open it.
What’s the relationship between Google, Cisco and Splunk?
Re: Insider trade on Splunk acquisition?
#118Earlier quoted context omitted.
>Is that considered insider trading? Yes.
Legally speaking then, it's best to never make trades on any company that you currently or have previously (because you could still have friends that work there) worked for?
Have you never worked for a publicly traded company where part of your compensation is in RSUs?
You are only able to trade share's during specific windows of time typically 1 week after earnings are released.
Additionally virtually every company I've known has explicit policies stating that you cannot buy/sell any derivatives related to the company stock (which is a shame since buying put options is a legitimate way to insure your compensation).
Further more, even these rules are only this lax for non-executive or other high level employees. If you're higher up in the company you have much more access to non-public material information. The solution to this is usually to set up a 10b5-1 that automatically liquidates shares based on a schedule approved by the board.
In regards to the "previously" question. I wouldn't worry about legitimate trades, but if you are trading based on insider information and looking to gain a lot of money, then trading would, by definition, be "insider trading"
Re: Insider trade on Splunk acquisition?
#119Can someone explain the mechanics of this specific trade to a noob? The trader bought 550k options yesterday for SPLK to hit $127/share? Since that seemed highly unlikely they were only priced at $.04 each. but now that SPLK is at $145/share they are worth $18 each? so that would be a profit of ~$10m?
Yes. The one bit you’re missing is that a call option is the right to buy a stock at a certain price typically on or before a certain date. To make the numbers simple, imagine a stock trades at $10/share. If someone came to you and said: how much would you be willing to pay to have an option to buy the stock for $100/share? The correct answer is: it depends. If it’s the right to buy the stock for $100/share at any po…
> And strategy 2 seems especially suspicious because the risk is so high and the non-illegal reasons for doing it are so few and far between. Very few reasons you’d buy a bunch of call options that only pay off if something causes a stock to move dramatically in 24 hours.
But why are they then legal to sell? It almost seems like someone wants to be able to sell them, but when they lose the bet they want to revert it. Free money if you're on the correct side.
Re: Insider trade on Splunk acquisition?
#120I know this isn't what happened, but what if one day I'm waiting for the bus and I over hear a guy talking on their phone about an imminent acquisition?
1. Would that still fall under insider trading even if the information was accidentally heard, and even if I wasn't 100% sure of its accuracy?
2. If I had no clear connection to the company how would it be proven that I was trading on insider information? Surely it's not enough just to say the trade was statistically unlikely, or is it?