More Theft & Corruption: Call Option Trading On Acxiom Jumps 1000% Prior To Buyout

Discussion in 'Wall St. News' started by ByLoSellHi, May 17, 2007.

  1. Acxiom Options Trading Jumped Before Buyout News (Update3)

    By Jeff Kearns and Charles Brady

    May 17 (Bloomberg) --
    Trading in options to buy shares of Acxiom Corp. rose 10-fold in the week before yesterday's announcement that two buyout firms will acquire the provider of computer and database services for $2.24 billion.

    The number of call options traded in Acxiom jumped to 1,400 on May 10, the most in any day since October and more than 10 times the average of 135 in the preceding 20 days. More than 1,300 contracts traded on May 14 and each of the next two days.

    Well-timed options bets have been placed in the days before at least a dozen takeover offers were disclosed this year. Trading in contracts tied to Florida East Coast Industries Inc. and Armor Holdings Inc. jumped before announcements last week that they would be acquired. The Securities and Exchange Commission has investigated options trading in TXU Corp. and Dow Jones & Co. prior to takeover news.

    Acxiom's volume is an indication that some buyers ``knew more than the normal trader did,'' said Michael Schwartz, chief options strategist at Oppenheimer & Co. in New York.

    Call options give investors the right, without the obligation, to buy shares of a company at a specified price by a certain date. Many investors buy and sell options for speculative purposes, as the value of the contracts changes with movements in the underlying stock prices.

    The most actively traded contract in Acxiom yesterday gave investors the right to buy the stock at $25 by May 19. The price of those contracts increased fivefold from yesterday to $2.50 as of 2:55 p.m. in New York. A $1,000 bet on that contract placed two days ago would be worth $10,000 today.

    `They Knew'

    All of yesterday's trading in the May $25 calls occurred during the last 70 minutes of trading.

    ``They knew the exact date, if not what time, the announcement was going to be made,'' said Michael McCarty, a trader who searches for unexplained options patterns at Meridian Equity Partners Inc. in New York. ``In 72 hours these things would have expired worthless,''

    Acxiom shares closed at $23.67 yesterday and had fallen four straight days. They added $3.96, or 17 percent, to $27.63 today. As of yesterday, the shares had not traded above $25 since Jan. 18.

    The rise in well-timed options trading has happened during a boom in corporate takeovers. More than $2 trillion in global mergers have been announced this year, a record pace.

    Trading in options to buy shares of Florida East Coast Industries Inc. surged to the most ever last week before the railroad operator said it will be acquired by private equity firm Fortress Investment Group LLC.

    SEC Watching

    Armor Holdings Inc. options volume was a record four days before the largest maker of armor for Humvee vehicles used in Iraq said May 7 it would be bought by BAE Systems Plc.

    The SEC is monitoring options bets. Dow Jones said May 5 that it received a subpoena after options trading rose before News Corp.'s $5 billion bid for the company was disclosed.

    The SEC sued a Hong Kong couple last week for insider trading of Dow Jones stock.

    Buyout firms Silver Lake Partners and ValueAct Capital Partners LP said in a statement yesterday that they agreed to buy Acxiom for about $2.24 billion. They will pay $27.10 in cash for each share, 14 percent more than yesterday's closing price, Acxiom said in a statement.

    Suellen Vann, a spokeswoman for Little Rock, Arkansas-based Acxiom, said the company does not comment on trading activity.

    Silver Lake spokesman Matthew Benson declined to comment. ValueAct managing director Jeff Ubben didn't return phone messages.

    Merrill Lynch & Co. and Little Rock-based investment banking firm Stephens Inc. advised Acxiom on the buyout, the company said in a statement. Silver Lake was advised by UBS AG, Acxiom said. Merrill spokeswoman Terez Hanhan and UBS spokesman Doug Morris declined to comment.

    A voicemail message left for SEC spokesman John Nester was not immediately returned.
  2. I don't doubt a lot of them knew -- but I wonder how you can prove you didn't know if you're a subscriber of a service that scans for exactly that type of thing. Is it insider trading if you see obvious insider trading going on, and take advantage of it?
  3. Bob111


    i see Merrill Lynch & Co, so Wong's must be somewhere around finally buying some options unstead of stock :D
  4. S2007S


    amazing how this can continue....

    This is like the 4th or 5th time in about 3-4 weeks that something of this matter took place.
  5. Cmon, every horseplayer knows that the meant steeds have insider money on 'em.

    You can't stop this until you have 50-1 fines.

    You pay 50 times what you made if they catch you and prove it.

    I dare those ball less wonders to implement that.

    They just caught a guy who did some scamming with family and friends on bank stocks over a 10 year period. 12 million, I think he has to pay it back.

    I guarantee, that if the penalty is nasty enough , much of this would stop.

    Hey, if murder was a light sentence, there'd be a lot more dead people.
  6. im surprised people are surprised by this.

  7. I agree.. fines are at best a wrist slap...

    no incentive -not- to do it for those in the driver's seat.