“There’s no end to the parade of corporate transactions preceded by trading underlying their selective disclosure,” says a recent Bloomberg article, “And there’s no sign regulators see the possibility of insider trading in at least a dozen of them during the past year,” citing examples of Google’s offer for Fitbit and LVMH’s plan to purchase Tiffany.
“That’s too bad,” the article adds, “because financial markets provide the clearest signals of people profiting from confidential information.”
The article describes in detail several examples of spikes in trading activity that preceded corporate acquisitions, noting that this has been the busiest year since 1998 (when M&A data collection began).
“They actually help explain more recent examples of probable market manipulation, such as Fitbit options surging during the week leading up to the Google takeover indicating a bid was imminent in the absence of any news.” And, the article reports, the valuations of the companies involved changed significantly.
The article cites findings of a recent Bloomberg study of 5,000 U.S. companies showing that during the past two years, 20% of the time, “certain combinations of alerts, including stock trading, social media activity and credit default swaps, were followed by a mergers-and-acquisition announcement in five days.” That ratio, the analysts note, is triple the level if “all anomalies were to occur randomly.” It concludes, “So where are the regulators?”