Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Insider trade on Splunk acquisition?

twitter.com

Post reply on HN
Print view View original

121–130 of 371 posts

Re: Insider trade on Splunk acquisition?

#121

Post by WJW »

frontman1988 wrote: post #107
dtnewman wrote: post #28

Earlier quoted context omitted.

It's definitely suspicious and will probably be looked into. If it turns out it's a trader who regularly buys soon-to-be-expiring option calls, maybe it'll fly. But if the trade was made by someone who doesn't regularly make $20,000 options bets, they will need a good explanation.

Why will they need a good explanation? Can't they just say I lucked out and the burden of proving insider trading would fall on the SEC? Innocent until proven guilty right?

If they did not usually trade in such options but suddenly started doing so the day before it had a major market-moving event, that could be the type of "reasonable suspicion" that you need to get a search warrant from a judge. From there on, investigators could demand access to (say) electronic communications to determine if the person doing the trade got a text from a friend saying "yo buy 20k of short term call options on Splunk you won't regret it bro" or something similar.

Especially if the person doing the trade is found to be employed by (or closely related to someone employed by) Cisco or Splunk or one of their banks.

Re: Insider trade on Splunk acquisition?

#122

Post by paxys »

jkubicek wrote: post #6

Obviously I don't condone insider trading, but it's nice to see someone go all in and make some real money. If you're going to risk jail time, you might as well do it for life-changing amounts of cash. Contrast this with Stephen Buyer who's going to trial and may well end up in jail for a piddly few $100k.

On the contrary, to be a successful criminal you have to learn to stay under the radar. Yes millions might be available for the taking, but in doing so you will most certainly get caught. On the other hand no one will blink an eye at a trade that nets you a few hundred K, and that is still a significant amount of money.

Re: Insider trade on Splunk acquisition?

#123

Post by mandevil »

dmoy wrote: post #69
mandevil wrote: post #63

Earlier quoted context omitted.

This is false. Then-sitting Congressman Chris Collins (R-NY) pled guilty and was sentenced to 26 months in prison for insider-trading back in 2019-2020. He was pardoned by President Donald Trump as one of his last official acts as President, but Collins still spent 10 weeks in prison for insider-trading as a sitting congressman (this was for knowledge he gained outside of his duties as a congressman, it was knowledge…

Banned, but not enforced, and due to the 2013 removal of electronic disclosure requirements, harder to detect? https://campaignlegal.org/update/part-2-stock-act-failed-eff...

Eh, my take is that the electronic disclosure stuff makes this more annoying for the activists- the people who are building dashboards of Congressional performance etc.- but doesn't fundamentally change the nature of the problem. The activists still build their dashboards, still comb through the documents and find things that look really bad, it's just slightly more out of date and slightly more work for them.

I do think that something like the Ban Congressional Stock Trading Act (everything in a blind trust), or its even more draconian (no blind trusts, just sell!) Ban Stock Trading for Government Officials Act will probably pass, eventually. Those are general markers for where we are going. But to just say "It's not illegal if you are a Member of Congress" is flat wrong and encourages a level of cynicism that makes it harder to actually fix the problems we face today.

Re: Insider trade on Splunk acquisition?

#124

Post by hotpotamus »

frontman1988 wrote: post #107
dtnewman wrote: post #28

Earlier quoted context omitted.

It's definitely suspicious and will probably be looked into. If it turns out it's a trader who regularly buys soon-to-be-expiring option calls, maybe it'll fly. But if the trade was made by someone who doesn't regularly make $20,000 options bets, they will need a good explanation.

Why will they need a good explanation? Can't they just say I lucked out and the burden of proving insider trading would fall on the SEC? Innocent until proven guilty right?

They could probably just tell the SEC, "I think you're a bunch of stupid doodooheads" and see how well that works.

Re: Insider trade on Splunk acquisition?

#126

Post by briffle »

eastdakota wrote: post #100
bryan0 wrote: post #49

Can 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…

I didn't have the same question as the OP, but I appreciate and learned from this well written response.. (I had never looked at options grants that way) thank you.

Re: Insider trade on Splunk acquisition?

#127

Post by euos »

kypro wrote: post #120

I 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…

Burden of proof would be on FCC.

Re: Insider trade on Splunk acquisition?

#129

Post by WJW »

vkou wrote: post #90
xyzelement wrote: post #81

Earlier quoted context omitted.

// unless you're actively regularly trading in the millions. A lot of people/organizations bet in the millions.

Sure, and the SEC investigation will probably figure out if this is one of a thousand daily trades that got placed by the beneficiary, or if he opened a trading account last week, and this is the first time he's buying options.

Even worse than opening a trading account last week: they've got a looooong history of doing nothing but the most boring buy-and-hold-index-funds investing you can imagine, until they suddenly bought 20k in lottery tickets that just happened to hit their one-in-a-billion chance to pay out.

Re: Insider trade on Splunk acquisition?

#130

Post by bragr »

kypro wrote: post #120

I 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…

It's still not public information (e.g. "Material Nonpublic Information"). You can't trade on it.

See 17 CFR § 240.10b5-1 "Trading “on the basis of” material nonpublic information in insider trading cases", particularly section (b) "Awareness of material nonpublic information."

https://www.law.cornell.edu/cfr/text/17/240.10b5-1

Post reply on HN