Forum - View topicNEWS: Tokyo Man Arrested for Insider Trading on Gonzo's GDH
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Dargonxtc
 Posts: 4463 Location: Nc5xd7+ スターダストの海洋 |
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Wow. That means Gonzo's stock (or GDH's?) was $918.52 a share! Hard to imagine that only a year later they were facing delisting. 
Though I think the fact that he only made tens of thousands of dollars (perhaps less than 20% gain), and originally bought the shares piecemeal overtime doesn't really scream insider trading. They must (and I would hope) have some harder evidence than that. I know the article says he received confidential information. But that is basically saying the same thing as allegedly being charged with insider trading, and that is the same info in the headline. |
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yblees
 Posts: 165 Location: New Zealand |
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Had the same thought as above - geez those are some expensive shares! *heh*
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Nom_Anor
 Posts: 246 |
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Share price has nothing to do with stock value. Many companies like having high share prices to discourage short term or small investors(see: Berkshire Hathaway, http://www.google.com/finance?q=NYSE:BRK.A), while others like to keep share price low to make it easier to trade. It's really not important.
Still, insider trading=bad idea. Especially such obvious insider trading. |
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Dargonxtc
Posts: 4463 Location: Nc5xd7+ スターダストの海洋 |
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That is an extreme example, but even so, the company doesn't determine price, the market does. Except for preferred and treasury stock, the company can't set what it trades at day to day. BRK.A kept prices high by simply never creating more stock, and never splitting. So yeah companies can influence relative positions of their stocks, but they have to do that from the onset because its tougher to go back otherwise. So while they can influence, they can do nothing to set price or prevent the price from rising or falling rapidly*, the market does that. BRK.A only has 1.65 million shares outstanding, most companies have 1 billion. *You could do a split or a reverse split, but you can only do that so many times before you cause major problems with your company and the SEC. Plus it is a rather long process. Either way there is no way a company can set an exact price, unless it is preferred stock.
Except there was nothing obvious about his actions except the fact that he is charged with insider trading. The article gives no details what so ever. Therefore it can't be obvious. I am not trying to defend insider trading. But I am not going to convict someone simply because the government suggests I do. There is too much of that going on as it is these days. At least give some facts about the case. |
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Richard J.
 Posts: 3367 Location: Sic Semper Tyrannis. |
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Stock prices can be extremely high for companies that are essentially worthless if the investors think the company is worth something. Anyone remember the AOL/Time Warner buyout? AOL essentially bought Time Warner back in early 2000 (the deal was announced January 10th) for $163 billion. AOL stock was worth at that time about $71.88 a share and the deal was made with stock as the currency of choice. There was even talk during that time of AOL buying Wal-Mart!
Despite low revenue for the company, AOL was considered at the time to be a major Internet company and on the cutting edge of the new paradigm of a world in which a company didn't need any hard assets to be high-value. AOL achieved enormous success through the combination of marketing portal deals that massively jacked up the prices of IPOs for other Internet companies, especially start-ups, and the sheer mania that hit Wall Street regarding Internet companies. To get an idea of how crazy the times were, a company called N2K did a portal deal with AOL for $18 million as a way to increase its stock price for their IPO (that's Initial Public Offering.) The company, which lost $19 million on sales of $1.7 million in its then recent fiscal year, would be valued at $284 million by the end of its first day as a public company. N2K never earned a penny and folded soon after, likewise many other Internet companies that did mega-million dollar deals with AOL for portal deals. About two years after AOL bought Time Warner, the total value of AOL stock had gone from $226 billion to about $20 billion. The company lost its insanely high value when the Internet bubble burst and investors started to really look at the objective value of the companies. (I'm reading a book about the merger deal and it is fascinating!) Sometimes the market can completely misjudge a company's value due to investors thinking one aspect of a company matters more than any other or that they are on the verge of some great achievement. With Gonzo/GDH, if investors in Japan thought either company was awesome for whatever reason, their stock could be up even if they were losing money like the government spends our tax dollars. Similarly, even if a company is strong, if the perception is that something is wrong, the stock will drop in value regardless of the actual situation. And since the guy was a banker, he REALLY should have known better than to dabble in insider trading. What an idiot. After company personal, wouldn't bankers be the first people you'd look at if you suspected insider trading? |
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