Martha Stewart, Revisited

Discussion in 'Politics, Religion, Social Issues' started by Desertrat, Mar 12, 2004.

  1. Desertrat macrumors newbie

    Joined:
    Jul 4, 2003
    Location:
    Terlingua, Texas
    #1
    Ran across some thoughts on the subject; not my own, but I pretty much agree with some of the notions.

    Hokay: Who was hurt by Martha Stewart's insider-knowledge sale? Who lost money as a result of her action?

    ImClone stock was gonna go down, on the news that the FDA hadn't given approval to the new product. Stewart didn't cause that. And, her sale was of not enough shares to affect the market. Further, ImClone stock has recovered some of it's losses, so ImClone stockholders certainly weren't hurt by her action.

    As a result of the laws against insider trading, the prosecution of Stewart has caused the value of her company's stock to fall. Sure, one could say that her breaking the law led to this devaluation, but Stewart's stockholders were hurt by the fact of prosecution.

    The question raised, then, is why is insider trading against the law? In this case, the law did more harm than good.

    Note that purchases and sales of stock by those considered to be Insiders are listed as public knowledge. Thus, why should those who have separate access to inside knowledge about a company's condition be disallowed from using it? Any CEO can sell his stock at any time that he thinks he should bail out of the holding.

    Has not the stock market long been a place of "caveat emptor"? Is it not historic that all companies try to make themselves look good on paper? Is it a place as secure as your local bank insofar as a safe place to "park money"? Is there no individual responsibility to know in reasonable detail as to the condition of a company whose stock one contemplates purchasing? The answers to these sorts of questions lead to the larger question about the legality or illegality of using inside knowledge...

    :), 'Rat
     
  2. zimv20 macrumors 601

    zimv20

    Joined:
    Jul 18, 2002
    Location:
    toronto
    #2
    most immediately, whoever bought her stock only to watch the price plummet.

    in the larger picture, you're right, one insider trade isn't going to hurt the market. but a lot of them would, especially if the non-insider public lost faith in the system.

    so the SEC is there to ensure that insider trading doesn't happen and, when it does, those involved are punished. it props up the faith in the market, which i'd argue is what most of it is based on.

    do i feel sorry for her? not really, she broke the law and was caught. is she the worst offender? not by a long shot. i'm still waiting for the ken lay and bernie ebbers indictments.
     
  3. Frohickey macrumors 6502a

    Joined:
    Feb 27, 2003
    Location:
    PRK
    #3
    Yeah. It was pretty weird hearing one of the jurors say that the verdict was for the little guy. Oh, you mean the little guy that has some shares in Martha Stewart Living Omnimedia Corp (or whatever the name of it was).

    Waksal definitely did do insider trading, but aren't CEOs of companies also have to declare sales of stock well in advance. I know that when Rubenstein or any of the Apple VPs sell stock, they have to declare when and how much well in advance.

    Also, the imclone drug that wasn't approved by the FDA that prompted the whole affair did get approved. imclone stock is up on this one.

    Beware the citizen in the right when the government is in the wrong.
     
  4. Sun Baked macrumors G5

    Sun Baked

    Joined:
    May 19, 2002
    #4
    This really wasn't about "Insider Trading," -- it was more about Martha doing what lawyers and/or their clients have done for years with regard to SEC Investigations, stonewall or lie.

    Martha Stewart and Banc of America ($10 Million Fine for impeding an investigation) will probably be the poster children for how the govt. plans to handle individuals and companies from now on.

    ---

    She had several chances to get out from under this mess (take responsibility for the trade or the original plea bargain), she gambled that her lie would hold up in court -- it didn't.

    Even if she had a legit sell order with her broker, the timing of the phone calls, trade, and phone log alterations looked really bad.

    And as a retire broker herself, she should have seen a insider trade charge coming.
     
  5. zimv20 macrumors 601

    zimv20

    Joined:
    Jul 18, 2002
    Location:
    toronto
    #5
    that's nearly a voltaire quote
     
  6. Frohickey macrumors 6502a

    Joined:
    Feb 27, 2003
    Location:
    PRK
    #6
    Thats why its better to keep your mouth shut.

    Anything you say can... no... strike that... WILL be used against you.
     

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