Takeover and Insider Trading - Part 1
July 25th 2007 13:03
It could be quite horrific to know if you are in the market and yet having no clue to the current hip words of "private equity" and "takeovers". The Flying Kangaroo of Qantas was one of the famous target by private equities and almost became an American Flying Kangaroo.
Fueled by excess liquidity and cheap debt, private equities usually target listed companies and then take them private through acquisition of shares enough to give them the controlling stake, either through negotiated deals or predatory takeovers. A successful takeover will usually be followed by change of management and corporate restructuring with the objective of bringing further growth and value to the company.
If you have followed the news and quotes you would have probably noticed the usual surge in share price when a listed company is targeted for a takeover. Certainly a boon for shareholders but is this all? For the retail investors and common shareholders, the mainstream news outlet are the only form of legitimate sources of information with regards to the market. You received the information without the right of asking further questions. In the case of takeover news, there is only so much you can know. It is a one way street.
If you are not in the inner circle you are definately an outsider who could only rely on news, rumours and some tips from your broker/adviser perhaps. The sharemarket is all about information and information affects shareprices which in turn affect your investment decision. Your decision will be a general one if you get general information.
It has long be argued that corporate managers and top officers have better information of their companies than outsiders. It is just meritoriously logical. And yes, corporate insiders do trade their own shares and it is not entirely illegal. It is only against the law when the trading takes place prior to official annoucement of corporate information such as earnings annoucement.
On the premise that insiders have better information which could means quality information, will they consistently beat outsiders in terms of share gains? On the theme of takeovers, are insiders just as innocent as outsiders without knowing that suddenly a takeover proposal was just received by mail?
The primary issue here is whether can all of us enjoy quality information? Thanks to the corporate legislation all legitimate insider trades must be filed with corporate watchdogs such as ASIC and the US SEC. With this, we can at least sort out the trading patterns by insiders involved in takeovers, if any, and interpret it for trading and investment decision formulation. You would possibly find the right value in it, from the inside.
Stay tune...
Fueled by excess liquidity and cheap debt, private equities usually target listed companies and then take them private through acquisition of shares enough to give them the controlling stake, either through negotiated deals or predatory takeovers. A successful takeover will usually be followed by change of management and corporate restructuring with the objective of bringing further growth and value to the company.
If you have followed the news and quotes you would have probably noticed the usual surge in share price when a listed company is targeted for a takeover. Certainly a boon for shareholders but is this all? For the retail investors and common shareholders, the mainstream news outlet are the only form of legitimate sources of information with regards to the market. You received the information without the right of asking further questions. In the case of takeover news, there is only so much you can know. It is a one way street.
If you are not in the inner circle you are definately an outsider who could only rely on news, rumours and some tips from your broker/adviser perhaps. The sharemarket is all about information and information affects shareprices which in turn affect your investment decision. Your decision will be a general one if you get general information.
It has long be argued that corporate managers and top officers have better information of their companies than outsiders. It is just meritoriously logical. And yes, corporate insiders do trade their own shares and it is not entirely illegal. It is only against the law when the trading takes place prior to official annoucement of corporate information such as earnings annoucement.
On the premise that insiders have better information which could means quality information, will they consistently beat outsiders in terms of share gains? On the theme of takeovers, are insiders just as innocent as outsiders without knowing that suddenly a takeover proposal was just received by mail?
The primary issue here is whether can all of us enjoy quality information? Thanks to the corporate legislation all legitimate insider trades must be filed with corporate watchdogs such as ASIC and the US SEC. With this, we can at least sort out the trading patterns by insiders involved in takeovers, if any, and interpret it for trading and investment decision formulation. You would possibly find the right value in it, from the inside.
Stay tune...
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