Wednesday, July 22, 2009

Insider Trading on Sky City shares




Most people who watch the New Zealand Stockmarket closely know that there is frequent trading of shares based on insider information, the New Zealand Stockmarket is just like a small town, everyone knows everybody else's business.

I am not a share price follower, more of a company watcher but I have been looking at movements in Sky City Entertainment Group [SKC.NZ] share price pretty closely over the last 9 years or so.

I have come to the conclusion that Sky City is one of the biggest insider traded stocks.

Every reporting period you can always get a good idea about the profit result before it comes out, based on whether the insiders have traded on good or bad company news.

Yesterday's announcement of an upgrade in Sky City profit is a case in point in insider plays.

A very large volume of almost 8 million shares valued at nearly NZ$ 24 million was traded and the share price ended up 19c or just over 6.5%.

Over the last few days Sky City share price has taken a marked rise (see chart above and data below) and big volumes have gone through over the last 3 trading days.

Date
Open
High
Low
Close
Value
Volume
21 Jul 2009
2.880
3.100
2.880
3.050
23923490.3
7798468
20 Jul 2009
2.790
2.860
2.780
2.860
6702303.15
2373190
17 Jul 2009
2.660
2.780
2.660
2.780
18663101.84
6845077
16 Jul 2009
2.730
2.730
2.670
2.680
5240196.25
1942297
15 Jul 2009
2.660
2.690
2.630
2.690
2766984.42
1041257
14 Jul 2009
2.630
2.650
2.620
2.650
3258738.82
1240619
13 Jul 2009
2.660
2.660
2.620
2.620
1262989.85
480511
10 Jul 2009
2.680
2.690
2.650
2.650
1367532.26
514690
09 Jul 2009
2.640
2.680
2.640
2.680
1810909.48
676984
08 Jul 2009
2.630
2.650
2.620
2.650
5499837.7
2087514

Data From NZX

As I mentioned in a column on Monday there was big volume going through on Friday the 17 July when over $18 million of stock was traded and the stock was up 10c. Insiders have known for a while about the profit upgrade because the stock price has risen from a recent low of $2.58 to finish nearly 30c higher at close of market Monday 20 July, before the profit upgrade was made public yesterday morning.

The bulk of insider trading was done on Friday the 17 July, bought by institutions/brokers for a quick buck and a large part of that was sold back to the mum and dad investor today.

It isn't necessarily wrong for insiders to know about profit upgrades like this one because they get briefed and updated by company management before the great unwashed, but it is illegal for them to trade shares in the company based on that knowledge.

Unfortunately nothing will be done by Mr Mark Weldon, CEO of the NZX , because it is his colleagues (the brokers) that are making money, and his NZX is clipping the ticket along the way as large volumes of shares are traded.

Who needs a monkey with a dart when you can trade on insider info?

Disclosure I own SKC shares in the Share Investor Portfolio

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Stock Frauds, Manipulations, and Insider Trading (Secrets of the Great Investors)
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c Share Investor 2009

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