Once again we need to talk about insider trading. This SEC press release is about a pretty garden-variety case – allegedly, Thomas Conradt learned about IBM’s planned acquisition of SPSS from his roommate, told his friend David Weishaus, and the two of them bought lots of SPSS stock and call options and made what in hindsight probably looks like an inadequate amount of ill-gotten gains – but it teaches important insider-trading lessons both subtle and otherwise.
First, otherwise: instant messages don’t go away when you close the window! I know, weird, right? But they’re on the internet, and you can be pretty sure that if you IM your idiot buddy “I don’t want to go to jail,” (1) you will be seeing that IM in an SEC complaint and (2) you are going to jail:
Oops!1 But there is also a subtler lesson, having to do with the long and complicated path this information traveled. It started with a law firm associate who worked on the deal for IBM. He (unnamed, but called the “Associate”) was from Australia, and he had a friend (the “Source”) who was a research analyst and from New Zealand, and he told the Source. Source, in turn, had a roommate, and that roommate was Thomas Conradt, one of the dopes charged here. Here is a touching, yet legalese, description of their friendship: Read more »