[throwaway789256]

An inside trader in the UK was also shown to be exchanging information with Bloomberg News's reporters:

https://www.bnnbloomberg.ca/the-mystery-millionaire-who-haun...

What's not being said here is that for the trader to have timed his bets so precisely, the reporter would have had to tell him when the story was coming out.

The anonymous sources on Bloomberg M&A scoops all have insider information one way or the other (think "provider of professional services in the deal space"), otherwise they would have nothing to say. While many of them are not stupid enough to trade on that information, nearly all of them get some kind of benefit from it, usually in the form of two-way information exchange with the reporter. Since they work on deals, they want to know about deals, because their livelihoods depend on deal flow.

VCs know this dynamic well, but they are far less regulated, because they primarily work with private companies, not public ones.

[mdeck_]

> What's not being said here is that for the trader to have timed his bets so precisely, the reporter would have had to tell him when the story was coming out.

Based on what are you speculating this? I just looked at the indictment, which is linked in the article. Page 8 shows that the timeline between the relevant inside activity and the article’s appearance in Bloomberg running to multiple weeks or even a month. More generally, I don’t see anything that would require an inside trader to know exactly when a news story on these kinds of topics is going to come out. If they know a stock is likely going way up SOMETIME in the near future, that is enough to conclude that the trade is a sure bet. So, no need for a specific tip (as to article timing) from the reporter, and therefore presumably no need for complicity by the reporter.

*I do not intend this comment to mean I believe the actual reporter actually was not complicit. I don’t know the facts of this case beyond what is stated in the story linked here.

[throwaway789256]

From the story:

> Peltz bought Ferro stock via others’ accounts, culminating with his last purchase at 9:37 am on March 15, 2016, according to the indictment.

> Around six or seven minutes after that final purchase, Bloomberg posted a scoop by Hammond and another Bloomberg reporter under the headline, “Ferro Said to Have Received Takeover Approach From Apollo,” a major private-equity firm.

A 6-7 minute gap implies coordination and foreknowledge of when the story would go out.

[mdeck_]

You’ve got your causation backwards.

He made a series of purchases... ok... of course his last purchase was shortly before the story was published. As to this being his last purchase, well of course—why would he keep buying after his insider advantage had evaporated? At that point there would be nothing more to take advantage of. Anyway, this does not show awareness on the part of the reporter.

Yes, the fact that his last purchase was close in time could show that he received timing information, but it could be that he was making lots of purchases over time and simply stopped once the story came out.

You note that he started selling after the scoops were published. Again, this doesn’t prove anything about the reporter’s (non-)complicity. I.e., OF COURSE he started selling after the story published. What did you expect him to do? He was waiting on the story to be able to trade on effects of its publication. Once it was published, the stock’s price would have shifted (presumably upwards) based on those facts—no more reason to hold the stock!

He bought options, which have time decay. Ok, but we don’t know that he bought options expiring within a few days or weeks rather than months. Anyway, these deal scoops were going to come out sooner or later—but reporters want to avoid being scooped, so they typically come out sooner.

Overall, I’m not convinced there’s anything here. Of course a criminal trial would/will make this all clearer...

[ric2b]

> As to this being his last purchase, well of course—why would he keep buying after his insider advantage had evaporated?

So is your claim that they were constantly refreshing the Bloomberg website for weeks? A 5 minute gap is quite suspicious.

[throwaway789256]

I don't think I do. To me it looks like some last-minute greed. He would have been smarter to keep his transactions further from the scoop.

But as I said, the nearness in time only implies coordination. I can't prove it. A trial might, or might not. I doubt that all the communications between the reporter and Peltz's burner phones were recorded.

The expiration date on the options would be interesting to know. If they were very short-term options (lower time decay) only slightly out of the money (higher time decay), that would be even stronger evidence.

The sales within a minute of publication are also strong evidence that Peltz knew what was coming when. You don't want the off chance of a sudden stock market crash to get in the way our your insider trading...

[lixtra]

> The sales within a minute of publication are also strong evidence that Peltz knew what was coming when.

I don’t agree. If you day trade in a stock it’s totally normal to watch the newsfeed filtered for it and react to stories within minutes.

[kgwgk]

I imagine that if the story has been published at 9:31 the purchase at 9:37 wouldn’t have happened and some other transaction would have been his last purchase. He may or may not have been aware of when the news would be published.

[throwaway789256]

That is logically plausible. An insider purchase that occurs minutes ahead of a market-moving event is merely circumstantial evidence, but it is very strong circumstantial evidence.

One thing to note is that Peltz bought options as well as stock. Options suffer time decay. That is, all other things being equal, their value decreases with the passage of time. The better you can time your purchase to immediately precede a market-moving event, the less time decay matters.

In addition, Peltz and his associates started selling their positions within a minute of the scoops being published. Do you think they just happened to be looking at their trading screens during that minute of the day? I don't think they would have left that to chance.

(Edit in response to the comment below: Bloomberg scoops do not appear on the open Internet for at least 15 to 20 minutes after their publication on Bloomberg terminals. So RSS wouldn't explain trades within a minute of publication. If Peltz and his friends were Bloomberg terminal subscribers, they could have set up some kind of alert there, sure. But still, not something you want to leave to chance... Even if you have your phone with you at all times, you're not always able to respond to the alerts that come up.)

[boomboomsubban]

>Do you think they just happened to be looking at their trading screens during that minute of the day?

Or they set up something like an RSS feed and had their phones ring when a keyword was mentioned. Knowing the story is coming is enough to make sure you're prepared.

Even if you did have advanced knowledge of when it was supposed to publish you would do this, so they can't betray you or nothing like a time zone mistake can ruin everything.

[boomboomsubban]

>Even if you have your phone with you at all times, you're not always able to respond to the alerts that come up.

So you hire someone who is always able to respond. Both parts that yous claim are convincing circumstantial evidence just seem like expected behavior that could be entirely scripted. "Buy all x below y, after z happens sell all x" would lead to both things happening.

[SomewhatLikely]

They stated the direction of information flow in the article: The feds allege that Peltz used disposable “burner” phones and encrypted apps to communicate with a journalist, and that the reporter provided “material nonpublic information about forthcoming articles” which Peltz used to trade in the market “just prior to publication of an article about each company written by the reporter.” The indictment describes “numerous contacts” between Peltz and a reporter, including at least one in-person meeting

[throwaway789256]

Thanks, I should have included that up top, but can't edit now. I think the key words there are "just prior to."

Other material information is that the story would be published at all.

[downandout]

The anonymous sources on Bloomberg M&A scoops all have insider information one way or the other

Yes, but trading on nonpublic information is not illegal unless it was obtained from someone that the trader knew was breaching a duty to the corporation in disclosing it, and some form of compensation is paid to the person that breached it [1].

So it begs the question...how is simply receiving secondhand information from a reporter prosecutable?

[1] https://www.msnbc.com/msnbc/wall-street-prosecutor-preet-bha...

[throwaway789256]

I don't think they are prosecuting Peltz for getting the information from the reporter. They are prosecuting him for this:

"Peltz obtained material nonpublic information about the private equity firm’s interest in Ferro from a member of Ferro’s Board of Directors (the “Ferro Insider”), and/or the Board member’s fiancée (now wife) (the “Ferro Insider’s Fiancée”)."

https://www.sec.gov/litigation/complaints/2020/comp24998.pdf

Everybody knows that company board members are not allowed to share information about potential acquisitions.

The information from the reporter was secondary, although still important, for Peltz to execute his plan.

[downandout]

For sure, that is illegal. But the whole crux of this article, including the title, is about him having made trades just before Bloomberg articles were released, and the article states that this was mentioned in detail in the indictment. It makes me wonder why that is at all relevant if that’s not what he is actually being prosecuted for.

[throwaway789256]

Tying insider trading to a Bloomberg reporter is very rare, although it has happened before, and I linked to one instance above.

Because it is rare, it is newsworthy, particularly for the Columbia Journalism Review. Even if you don't care about journalism, the fact that one of the world's great news organizations and news wires has ties to insider trading should concern you and Bloomberg's top editors, because it's dirty. You just don't want your reporters abetting crimes if you can avoid it.

My guess is that Hammond will not last long at Bloomberg. This story is more about the reporter than about the insider trading. And it is less about the law, and more about journalistic ethics. It doesn't matter whether it is illegal for the reporter to tell Peltz that the story will come out soon; it is certainly against his agreement with Bloomberg.

[downandout]

I don’t disagree. I was just saying that the talking to the reporter aspect didn’t actually have any relevance to the criminal charges - at least not to insider trading. I read the indictment after my comments and, at least from what I can tell, I was right. Though talking to the reporter is mentioned in the facts part of the indictment, it does not appear to be a basis for any of the charges. It’s more of an interesting footnote.