Insider trade on Splunk acquisition? • Hacker News Board

Re: Insider trade on Splunk acquisition?

#201

Post by bombcar » Thu, Sep 21, 2023, 6:58 PM UTC

hash872 wrote: post #154

kasey_junk wrote: post #133

Earlier 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....?

Many financial laws consider spouses to be "identical" from the point of view of law. Since your wife would benefit from you acting insider knowledge she has, it applies.

Re: Insider trade on Splunk acquisition?

#202

Post by harambae » Thu, Sep 21, 2023, 6:58 PM UTC

wanderingstan wrote: post #148

mason55 wrote: post #114

Earlier quoted context omitted.

> 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, yo…

This obligation-centric view is in conflict with my understanding and the above investopedia link: > Material nonpublic information is data relating to a company that has not been made public but could have an impact on its share price. It is against the law for holders of nonpublic material information to use the information to their advantage in trading stocks. Edit: or would a leak on a webpage be considered “publ…

> if you saw a company’s factory blow up while in an airplane, it would be illegal (insider trading) to trade on this information until the news was announced publicly

How does this square with using satellite analysis to predict a company's retail volume?

https://newsroom.haas.berkeley.edu/how-hedge-funds-use-satel...

Re: Insider trade on Splunk acquisition?

#203

Post by [deleted] » Thu, Sep 21, 2023, 6:58 PM UTC

lowbloodsugar wrote: post #187

pc86 wrote: post #155

Earlier quoted context omitted.

If I've got $5M to spend on attorneys, quite a few.

I would imagine that if you are fighting the SEC then $5m isn’t very much?

[deleted]

Re: Insider trade on Splunk acquisition?

#204

Post by ar_lan » Thu, Sep 21, 2023, 6:58 PM UTC

sakex wrote: post #198

Let's say you live in front of the Splunk office, and you see tens of people in suits, a limo with a CISCO sticker, as well as a lot of commotion on the office in front of you. You strongly suspect something is happening, you buy $22k of Splunk calls. Is that insider trading?

Disclaimer: not financial advice

I don't think so, it happened publicly, you weren't privvy to classified details. I would go for it if I were in that scenario.

Re: Insider trade on Splunk acquisition?

#205

Post by Projectiboga » Thu, Sep 21, 2023, 6:58 PM UTC

alexchantavy wrote: post #172

eastdakota wrote: post #100

Earlier quoted context omitted.

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…

What does out of the money mean?

https://www.investopedia.com/ask/answers/042715/what-differe... Out of the money call options are long shots, you'd loose money to buy the stock today via the option vs just buying on the open market.

Re: Insider trade on Splunk acquisition?

#206

Post by zeroonetwothree » Thu, Sep 21, 2023, 6:59 PM UTC

baq wrote: post #56

lacoolj wrote: post #51

Let's assume this turns out to be insider trading. Can someone shed a little insight on why this is worthy of a prison sentence? To me, even if they used information they had and we didn't, I don't see who the "victim" of this crime would be. It truly sounds like a "but it's unfair" argument and I'd really like to know why I'm wrong here. Thanks in advance

Fair markets are efficient markets. Regulators try to keep the markets fair and efficient. If a market is unfair, participants are scared away, which leads to more inefficiency and potentially a collapse of the market.

Insider trading also makes markets more efficient. So I don’t think your argument is as strong as you think.

I also think it’s weird we don’t apply this consistently. I can buy many assets with “non public information”, just not those the SEC regulates. So it’s not really about markets at all, but specifically about fairness for shareholders (or something by like that?)

Re: Insider trade on Splunk acquisition?

#207

Post by mcguire » Thu, Sep 21, 2023, 7:00 PM UTC

yieldcrv wrote: post #142

bragr wrote: post #130

Earlier 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

disagree, the SEC has lost a lot of cases on this idea if you’re not affiliated with the company and simply overhear and trade, make enough to retain a lawyer real quick

Oh, no doubt. There will be an investigation looking for a relationship.

Re: Insider trade on Splunk acquisition?

#208

Post by thisisit » Thu, Sep 21, 2023, 7:00 PM UTC

matsemann wrote: post #119

eastdakota wrote: post #100

Earlier quoted context omitted.

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.…

The illegal part in this equation comes from the asymmetric nature of the bet. Not many sane people play naked way out of money options. 99% of the time it is a losing trade. It is like playing the lottery. Perfectly legal. But being suspicious when someone who doesn’t play lottery buys one and wins next day.

While a hedged out of money option is commonplace. various payoffs you can create with options is mind boggling.

Re: Insider trade on Splunk acquisition?

#209

Post by jahewson » Thu, Sep 21, 2023, 7:00 PM UTC

bragr wrote: post #163

mock-possum wrote: post #153

Earlier quoted context omitted.

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. [1] https://www.sec.gov/forms

So if the founder goes on TV and announces their merger then it’s nonpublic information until they file the form? Everyone who trades on that is insider trading? That can’t be right.

Re: Insider trade on Splunk acquisition?

#210

Post by spaceman_2020 » Thu, Sep 21, 2023, 7:00 PM UTC

sleepychu wrote: post #64

lacoolj wrote: post #51

Let's assume this turns out to be insider trading. Can someone shed a little insight on why this is worthy of a prison sentence? To me, even if they used information they had and we didn't, I don't see who the "victim" of this crime would be. It truly sounds like a "but it's unfair" argument and I'd really like to know why I'm wrong here. Thanks in advance

I can't tell you why any non-violent crime warrants a custodial sentence. It seems like civil penalties really ought to be enough deterrent and a much better recompense to society. Who is the victim? The person who bought the stock you knew was worthless or sold you the stock you knew was gold. Why is insider trading a crime? It's an unmanageable market advantage, if we didn't disallow it then people wouldn't play. T…

It pretty much undermines the fairness of the entire market. If insider trading wasn’t a crime, the single goal of every investor would not be to find investable companies but to find insider information.

The stock market would cease to be an effective tool for raising capital.

It would be more akin to the crypto market where there are no such rules about insider trading and everything is pumped and dumped via influencers and degens acting on insider tips.