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Money Stuff: Insiders Trade in Outside Companies

by
Matt Levine
Money Stuff
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Insider trading of another company

  • The SEC sued Matthew Panuwat, head of business development at Medivation, for trading Incyte Corp. stock after learning that his company was going to be acquired by them.
  • Company insiders regularly use corporate information to trade in the stocks of other companies but the SEC usually doesn't go after them.
    • The difference with Panuwatt was that he bought short-dated call options, which made it an obvious case of insider trading.
  • When companies have policies restricting people from trading their stock AND comparable company stocks, insiders are much less likely to.

Banque Worms

  • Citigroup accidentally wired $900 million to some hedge funds. Some gave the money back, while others didn't. This led to a lawsuit that Citi, surprisingly lost.
  • New syndicate loans called "Revlon blockers" were written as soon as the decision came out, basically saying that if the bank sends money on accident, it has to be returned.
  • While it seems big, this ruling doesn't matter that much for future cases because it is a default rule and large syndicated lenders can just change their contracts to opt-out of the rule.

Free stock, expensive emails

  • Robinhood stock giveaways have hurt some companies with higher expenses for delivering proxy statements (which costs around 25 cents per email).
  • Robinhood's practice is now sparking backlash from these companies.

Meme Stock Rally

  • A group of 37 retail-trader favorites soared 10% Tuesday.
  • GameStop alone soared 28%, yet no news came out of it since this sort of volatility has become so common due to options trading.
  • Fundamental valuation techniques have become obsolete in light of high and irrational retail trading activity.
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