My brush with Insider Trading
My brush with Insider Trading
No, I didn't go to prison, but I did get burned
Go grab yerself a Diet Coke and get ready for a tale of intrigue that was probably illegal, but small potatoes.
First, I have become a fan of Bloomberg’s Matt Levine. He publishes a daily newsletter that is free about securities, money matters, and more than a little bit about all the chaos in Crypto currency. Often, insider trading is one of the themes in his newsletters, and it got me thinking about my “insider” trade.
In the way back – circa 1999 – I worked for a company that made semiconductor manufacturing equipment. As such I was surrounded by people who had a lot (and I do mean A LOT) of close connections to various suppliers and individuals.
One day, in a hushed tone, a rumor about a pretty significant merger was floating around. Non public information about a big company buying a small company. Cool, I am getting in on the ground floor. I was in my early 30’s, and this was my first stop on the big corporate path. It felt like I was finally going to get a taste.
So, I sold my meagre pool of vested stock options, about $15K worth (hey, I was a junior person, and a real nobody) and I bought stock in the acquiree.
As did a shit-ton of my peers. I think my boss (the Director of Marketing) went in for about $200K.
Naturally, the acquisition never happened, the stock I purchased slid to about $9K, and I ended up selling, licking my wounds. (years later that company did sell to a peer, but their stock never recovered, and I was wise to get out with only a 35% loss recognized).
I learned three things from that incident:
Never listen to the rumors. Far too often they are wishful thinking
If I had made a killing on that, we all would have gotten caught. Seriously, even in the late 1990’s the SEC would have figured out that shit. I came pretty close to a catastrophic outcome
I am not cut out to be a trader. I can’t pick stocks for shit, and I trust ETF’s and indexed funds. I am not a gambler, and that was a wake up call that it could all go bad.
In all, I was very lucky it worked out the way it did, and I got away with just losing some money that I missed, but the upside wasn’t worth the risk.