August 27, 2006
Measuredmarkets Study Reveals Abnormal Trading Before Buyout Announcements
From the NYT:
The boom in corporate mergers is creating concern that illicit trading ahead of deal announcements is becoming a systemic problem.
It is against the law to trade on inside information about an imminent merger, of course.
But an analysis of the nation’s biggest mergers over the last 12 months indicates that the securities of 41 percent of the companies receiving buyout bids exhibited abnormal and suspicious trading in the days and weeks before those deals became public. For those who bought shares during these periods of unusual trading, quick gains of as much as 40 percent were possible.
The study, conducted for The New York Times by Measuredmarkets Inc., an analytical research firm in Toronto, scrutinized mergers with a value of $1 billion or more that were announced in the 12-month period that ended in early July. The firm analyzed the price, the total number of shares traded and the number of individual trades in each stock during the weeks leading up to the announcement and looked for large deviations from trading patterns going back as far as four years.
Read the rest here.