The SEC’s immediate action ensures that potentially illegal profits cannot be siphoned out of this account while the agency’s investigation of the suspicious trading continues.
In a complaint filed in federal court in Manhattan, the SEC alleges that prior to any public awareness that Berkshire Hathaway and 3G Capital had agreed to acquire HJ Heinz Company in a deal valued at $28bn, unknown traders took risky bets that Heinz’s stock price would increase.
The traders purchased call options the very day before the public announcement. After the announcement, Heinz’s stock rose nearly 20% and trading volume increased more than 1,700% from the prior day, placing these traders in a position to profit substantially.
The SEC alleges that the unknown traders were in possession of material nonpublic information about the impending acquisition when they purchased out-of-the-money Heinz call options the day before the announcement.
The timing and size of the trades were highly suspicious because the account through which the traders purchased the options had no history of trading Heinz securities in the last six months. Overall trading activity in Heinz call options several days before the announcement had been minimal.
Source: SEC
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