The securities of 41 percent of companies that received buyout bids in the last year showed abnormal and suspicious trading in the days and weeks before the deals became public, the New York Times reported in its Sunday edition, quoting a study of the nation's biggest mergers.
The study, conducted for the newspaper by Measuredmarkets Inc, an analytical research firm in Toronto, examined mergers with a value of $1 billion or more announced in the 12-month period ending in early July.
It analysed the price, total 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.
Of the 90 big mergers in the period, it found that shares of 37 target companies exhibited abnormal trading in the days and weeks before the deals were disclosed, and that for those who bought shares during the periods of unusual trading, quick gains of as much as 40 percent were possible.
Trading on inside information about an imminent merger is illegal.
INSIDER TRADING?
Measuredmarket founder Christopher Thomas, a former analyst and stockbroker, told the Times that the analysis led to the conclusion that the unusual activities most likely indicated insider trading.
The Times noted that while it's always possible that a company's stock could move due to developments in a particular industry or business sector or because a prominent newsletter, columnist writes something that might prompt investors to act, with the companies that were analysed no such influences seemed to be in play.