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Insider trade on Splunk acquisition?

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417 points mkmk | 6 comments | 21 Sep 23 15:58 UTC | HN request time: 0.815s | source | bottom
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YeBanKo ◴[21 Sep 23 16:37 UTC] No.37600196[source]▶
Is there any legit way in which whoever made this trade could have got a wind of a potential acquisition without relying on inside knowledge?
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arcticbull ◴[21 Sep 23 16:39 UTC] No.37600226[source]▶
Knowing about the acquisition puts you in possession of material nonpublic information. It's unlawful to trade on the basis of such information whether you work at the company or not. Passing it along is 'tipping' and acting on it is still 'insider trading.'
replies(5): >>37600298 #>>37600301 #>>37600463 #>>37600527 #>>37602209 #
function_seven ◴[21 Sep 23 16:44 UTC] No.37600301[source]▶
My understanding is that having material nonpublic information is not—in itself—enough to make a trade illegal. As long as you're a true outsider, and didn't get that info using illegal means, you can trade on it.

Maybe this whale was tracking tail numbers, drove down to the executive airport, and saw that Cisco's chief M&A guy had a huge grin on his face as he stepped onto the plane.

(Okay, I doubt that highly, but it is a scenario)

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1. jldugger ◴[21 Sep 23 16:47 UTC] No.37600341[source]▶
Cisco and Splunk are both HQ'd in SF. If they were at the airport, it was coming back from Jackson hole or something.

The real trouble with 'maybe they were legit outsiders' is the options expired specifically today, which means you need to know _when the announcement_ is to profit.

replies(3): >>37600534 #>>37600662 #>>37601099 #
2. yellowstuff ◴[21 Sep 23 17:00 UTC] No.37600534[source]▶
I strongly suspect these trades are not legit. That said, the trader didn't necessarily KNOW that the deal would be announced today. Trading is a game of probabilities. It's possible that the trader used public information to figure out that Splunk could be acquired soon and there was a small but non-zero chance it would be announced today. In that case taking a $22k flyer on cheap options is a good risk-adjusted bet for a well-capitalized investor. (Although they'd have to factor in that this WILL result in a visit from the SEC, which is probably not fun even if you've done nothing wrong.)
replies(1): >>37601275 #
3. yttribium ◴[21 Sep 23 17:09 UTC] No.37600662[source]▶
SPLK option expiration dates are weekly out to 6 weeks.
4. dmazzoni ◴[21 Sep 23 17:37 UTC] No.37601099[source]▶
Fun fact: Cisco is actually headquartered in San Jose, but I believe that both companies have large engineering offices in both San Francisco and San Jose.

For those who don't know, they're both part of the same metro area (Bay Area) but they're 50 miles apart, anywhere from 1 to 2 hours apart depending on traffic.

replies(1): >>37603815 #
5. mattnewton ◴[21 Sep 23 17:47 UTC] No.37601275[source]▶
Yeah, I don’t know, an investor sophisticated enough to predict that without insider information, I would have to hope that they would also be sophisticated enough to make the trade less blatantly obvious as a big bundle on 1 day expiration otm call options.
6. jldugger ◴[21 Sep 23 20:26 UTC] No.37603815[source]▶
Still not taking a flight from SFO to SJC to seal a deal.