February 12, 2010
Cross Border Acquisitions by Emerging Market Companies
Abstract: We find a significant increase in both the number and economic size of cross-border acquisitions conducted by emerging market firms since 1990. The most dramatic turn is that the emerging market firms are becoming increasingly active in acquiring companies in developed countries. The analysis reveals two main growth patterns by emerging markets, either through mega deals (usually involving developed-market targets) or through frequent acquisition of smaller targets (usually involving emerging-market targets). Although the abnormal returns for targets acquired by emerging market firms is always positive, the magnitude more than doubles when the target is from a developed market. More importantly, emerging market acquirers also experience significant positive announcement returns when the target is from a developed market. Overall, we document that in their aim to grow globally emerging market acquirers play a significant role in cross-border acquisitions.
February 11, 2010
Airgas Insider Buying?
The SEC is now investigating these trades. Of course they are. I'm continually surprised that there remain people who think that buying options ahead of a major corporate announcement like an acquisition will go unnoticed. Believe me, it's not all that hard to figure out. It's called a database. It's the same way that Walmart knows that men tend to buy beer and diapers when their wives send them shopping.But before the takeover bid was announced, a burst of activity in a few select Airgas call options occurred, fueling suspicion that the news was leaked ahead of time and was used to profit on a potential spike in Airgas' stock.
"This does not surprise me that regulators would want to find out who was behind the heavier-than-normal call option volume on the last trading day prior to the announcement," said Henry Schwartz, president of Trade Alert.
"In fact, Airgas call volume started to lift on Jan. 29 and continued to be above normal all that week, suggesting that the leak, if there was one, happened about a week in advance of the proposed deal," Schwartz said.
February 10, 2010
"Just Say No" Challenge in Del.
Last week Air Products filed a suit in Delaware Chancery Court challenging Airgas' "Just Say No" defense. This has the makings of being an important case if it gets as far as a ruling.
Tortious Interference and Pennzoil
February 9, 2010
More Galleon Scalps
Specifically, in April 2007, GOEL obtained Inside Information regarding Intel's earnings announcement for the quarter ending in March 2007 from a colleague who worked at Intel. GOEL provided this Inside Information to RAJARATNAM on Friday, April 13, 2007, at which time Galleon Tech held a short position of approximately 1,150,000 shares of Intel common stock (worth approximately $23.5 million). Intel was scheduled to announce its quarterly earnings on Tuesday, April 17, 2007.
Between April 13 and April 17, 2007, after receiving the Inside Information from GOEL, RAJARATNAM caused Galleon Tech to cover its entire short position in Intel common stock and to purchase approximately 1.72 million additional shares of Intel common stock (worth approximately $36 million). These trades changed Galleon Tech's position in Intel common stock from short approximately $23.5 million to long approximately $36 million -- a swing of approximately $59.5 million -- in the three business days preceding Intel's earnings announcement. In addition, on April 17, 2007, RAJARATNAM also caused Diversified to purchase approximately 250,000 shares of Intel common stock.
Goel also provided Rajaratnam with information related to a
pending Intel joint venture. According
to the complaint
from the SEC, Rajaratnam bought stock on Goel’s behalf and presumably as a payoff for the information that Goel provided.
Galleon is a continuing object lesson for a new generation of
investors and Rajaratnam is fast becoming the Ivan Boeksy of this
generation. Of course, the US attorney
probably got lucky here. Without a
wiretap, both of the charges against Goel could have been hard to make
First, the trading in advance of the announcement of the Intel
joint venture: Rajaratnam received the
information and bought months in advance of the announcement. That’s not the kind of thing that gets easily
noticed and there are plenty ways to explain that away if pressed.
Second, the trading in advance of an earnings release. Well, the timing of earnings releases are like the phase of the moon – they’re highly predictable. And, when pressed it should be relatively easy for an investor like Rajaratnam to make a case that he had been following Intel for some time and could justify a purchase/sale prior to earnings.
On the other hand, if you’re going hand out inside information
business school classmates about the company you’re working for, rest assured that
the SEC knows where you went to school.
Also, if your business school buddy is buying shares of Hilton in your
name and you’ve not sent him a check, it doesn’t take a genius to figure out
what’s going on.
February 8, 2010
Canadian Insider Trading
Update: Acquisition announcements generate predictable movements in acquirer stock. For example, post-announcement returns are typically negative for high Tobin’s q acquirers, stock transactions, and foreign targets, but positive for venture capital-backed private targets. Pre-announcement trading of acquirer stock is more likely to be attributable to insider trading when the pre-announcement price changes match the expected post-announcement acquirer returns. Based on a sample of Canadian acquirers and public and private acquisition targets from Canada, the U.S. and 31 other countries over the years 1991-2008, we find evidence consistent with insider trading of acquirer stock. This evidence, however, is limited to specific situations and is far from generalizable to all types of acquisition announcements. The evidence thereby has policy implications for the allocation of surveillance efforts for initiating insider trading investigations.