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Insider trade on Splunk acquisition?
161–170 of 371 posts
Re: Insider trade on Splunk acquisition?
#162I suspect that the SEC will look at this one, because it looks extremely suspicious. But whether they can bring a case or not depends on the details: did the trader know about the acquisition and how did they get that info? Was an employee of either of the companies involved?
Re: Insider trade on Splunk acquisition?
#163Earlier quoted context omitted.
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
A guy speaking out loud at a bus stop isn’t public information?
The SEC has very specific rules and even specific form [1] they must file when companies release information like this.
Re: Insider trade on Splunk acquisition?
#164Can 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?
I know options well, but I dont understand how spreads didnt react to this volume. Wouldnt the asks go higher and higher and higher with that volume? Also, what insane market maker would offer this much volume and take the downside risk? It isnt even clear how they would offlay such a risk unless they just happened to be holding 550k*100 SPLK shares
the market maker still collected $22,000 in premium if they bought shares after selling the options, thats motivation enough to fill the entire order at a good price before another market maker does. you can write unlimited options, so without scarcity the bid and asks don't have to change if the buyer can be a little patient.
but if they only tried to keep up with the delta then they might not have bought enough shares and have some losses right now, on that one position
they can take losses its a risk
Re: Insider trade on Splunk acquisition?
#165Earlier quoted context omitted.
The SEC has recently been pursuing very expansive insider trading definitions, and they are occasionally losing, so it’s very hard to say. But traditionally in the US insider trading is not about market fairness, it’s about not stealing from shareholders. So if you have no obligation to the company or it’s shareholders you aren’t an insider. The phrase is “breach of a fiduciary duty or other relationship of trust and…
But I'm pretty sure I read a case of a guy who traded on a future acquisition and was convicted on insider trading charges. He surreptitiously overheard it from his fiance, who worked for the company. Doesn't this guy not owe a company he doesn't work for a fiduciary duty....?
Sounds like he failed in his fiance duties.
Re: Insider trade on Splunk acquisition?
#166I 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…
I'm sure it technically counts. If this was allowed imagine how easy it would be to get out of an insider trading accusation. > Oh, but I didn't pay employees for insider information. I merely overheard it at the bus stop! Granted, if this really is how someone learns of an acquisition it would be unlikely to get proven in court, and unlikely you'd even get accused as someone with no ties to the company. That all bei…
Imagine how easy it would be to accuse lucky traders of insider trading.
Re: Insider trade on Splunk acquisition?
#167I 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…
I've thought about this type of question a fair bit. I'd even go one step further and ask what if you're in a position where you might hear about this stuff now and then (but not in a way that's easily provable, say you regularly take a train at the same time as an M&A lawyer that you shouldersurf) and you semi-regularly buy $1,0000ish (of variable amounts) in low-DTE options basically on no information - the whole purpose of it is you're buying 'insurance' where you're paying some% premium for obviously -EV trades.
You do this for months (hopefully without your M&A 'friend' swapping jobs or going WFH) before you shoulder surf that a publicly traded company is being acquired at some massive premium and spear the whale for low-DTE calls within 2S.D. of your normal range.
If you get investigated you can just say that you regularly take these kinds of punts for fun. You've got a record to prove it. You've got no contact with people in these positions, you can provide your entire social calendar and contact list and be probably many steps removed.
FWIW I keep all my money in some individual stocks and index funds. I just think this kind of hypothetical is a pretty fun situation to try to optimize for.
Re: Insider trade on Splunk acquisition?
#168Earlier quoted context omitted.
The SEC has recently been pursuing very expansive insider trading definitions, and they are occasionally losing, so it’s very hard to say. But traditionally in the US insider trading is not about market fairness, it’s about not stealing from shareholders. So if you have no obligation to the company or it’s shareholders you aren’t an insider. The phrase is “breach of a fiduciary duty or other relationship of trust and…
But I'm pretty sure I read a case of a guy who traded on a future acquisition and was convicted on insider trading charges. He surreptitiously overheard it from his fiance, who worked for the company. Doesn't this guy not owe a company he doesn't work for a fiduciary duty....?
There's a sliding scale of accountability from "I did it", "My wife did it", "My fiance did it", "my significant other did it", "my neighbour did it" to "some person I don't know did it".
A fiance is still close enough that they are captured by lots of regulation, because collusion/cooperation between partners is so common.
Re: Insider trade on Splunk acquisition?
#169Earlier quoted context omitted.
Why don’t people track the investments of senators and congresspeople and race to follow them? It seems like an easy way to get nearly insider trading.
Because: > Trades executed by lawmakers or their families must be disclosed within 45 days of execution Is probably an issue (it's it's actually insider trading). People do track it, though: https://www.capitoltrades.com/politicians
As in they need to announce them 45 days before they make them? Or 45 days after?
Re: Insider trade on Splunk acquisition?
#170Earlier quoted context omitted.
The SEC has recently been pursuing very expansive insider trading definitions, and they are occasionally losing, so it’s very hard to say. But traditionally in the US insider trading is not about market fairness, it’s about not stealing from shareholders. So if you have no obligation to the company or it’s shareholders you aren’t an insider. The phrase is “breach of a fiduciary duty or other relationship of trust and…
But I'm pretty sure I read a case of a guy who traded on a future acquisition and was convicted on insider trading charges. He surreptitiously overheard it from his fiance, who worked for the company. Doesn't this guy not owe a company he doesn't work for a fiduciary duty....?
The family has the obligation. When you're trading one of the questions is if you, or your family, has rank at public companies. That would make the link from the guy, to wife, to company.