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SEC probes alleged insider trading on Heinz acquisition

English.news.cn   2013-02-16 10:57:11            

NEW YORK, Feb. 15 (Xinhua) -- The U.S. Securities and Exchange Commission (SEC) on Friday obtained an emergency court order to freeze a Swiss bank account on allegation of insider trading in a 28-billion-dollar acquisition of H.J. Heinz.

"We move swiftly to locate and freeze the assets of these suspicious traders, who now have to make an appearance in court to explain their trading if they want their assets unfrozen," Sanjay Wadhwa, senior associate director of the SEC' s New York Regional Office, said in a SEC statement released Friday.

According to the statement, the Zurich, Switzerland-based trading account was used to reap more than 1.7 million U.S. dollars from trading in advance of Thursday's public announcement about the acquisition of Heinz by Warren Buffett' s Berkshire-Hathaway and a Brazilian private-equity firm 3G Capital.

The SEC said the identities of the traders were unknown but alleged that they took risky bets that Heinz's stock price would rise and purchased call options the very day before the public announcement of the deal.

After the announcement, Heinz's shares surged nearly 20 percent and trading volume increased more than 1,700 percent from the prior trading day, therefore the traders were in a position to profit substantially.

According to the SEC, "the timing and size of the traders were highly suspicious" because the account had no history of trading Heinz securities in the last six months and trading activities in Heinz call options before the announcement was small.

"Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be improperly acting on confidential nonpublic information," said Daniel M. Hawke, chief of the Division of Enforcement's Market Abuse Unit.

The three largest global ratings firms have all responded to Heinz's acquisition. Fitch Ratings on Friday cut Heinz's ratings by three notches to BB+ from BBB+ and placed ratings on "negative watch."

Meanwhile, Moody's Investors Service and the S&P' s Ratings Services have placed their credit ratings on Heinz on review or watch for a possible downgrade after the announcement of the deal.

Moody's current ratings of the ketchup maker is Baa2, two steps closer to junk status, while the S&P' s ratings of the company is BBB+, just one step to junk territory.

Editor: Wang Yuanyuan
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