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The other day shares in London Capital Group (LSE:LCG) rocketed skywards and the company then issued a statement admitting that it had received a batch of takeover bids. I seem to have offended a few folks by putting 2 + 2 together and – like 99% of the population – arriving at an answer of 4. Well shout it out. The answer really is 4 and if you want to live in denial and pretend that nothing frigging untoward went on go for it. Live in pretence. But you are kidding no-one.
My comment ( as you can see HERE in my analysis of the situation) was:
Oh, so the shares jump sharply and then news of three bid approaches emerges. No insider dealing there then. Move along quickly. Do not ask questions.
I have had some folk on the trombone saying to me “how dare you suggest that London Capital staff were insider dealing.” Saints preserve me. Read the frigging piece again – I suggested no such thing! I did not suggest that anyone at London Capital was insider dealing. However, I made it abundantly clear that I do think that insider dealing took place. Of course it did. Any fool can look at the chart and there can be no other explanation at all.
It is not just the bids for London Capital where this happens. With both bids and profits warnings/fund raisings shares quite obviously move very sharply before news is released on an almost routine basis. Now this could all be part of some long running coincidence organised by a deity with a quirky sense of humour and a particular interest in stockmarkets. But we are grownups. We stopped believing in the tooth fairy a long time ago.
Quite clearly word gets out and some folks break the law by buying and selling on the basis of inside information. It happens all the time. I cannot see that there is anything too controversial in pointing this out. I do not condone it but just note that it happens all the bloody time.
Who does the dealing? It is very rarely the companies involved. They would not know how to do it without being traced, they do not have the systems in place and the men and women who have inside information within a given quoted company just are not made that way. And having been told who at London Capital knew what was going on I am absolutely 100% certain that no-one at that firm did anything wrong.
What non City folk may not know is just how wide the circle of insiders on any given transaction is. It will include: staff at the companies concerned, lawyers for both sides, brokers for both sides, Nomads and corporate financiers at both sides, regulators and folks at the AIM team, accountants, PR flunkies for starters. There may be printers (of documents) who know. The list goes on and on. As such it is, to me, absolutely no surprise at all that word of so many transactions leaks out and that someone decides to make a quick buck with a spot of insider dealing.
Now go ahead shoot me. Pretend that this does not happen. Do you feel happier now?
Libertarian, small state supporting, eurosceptic investment writer Tom Winnifrith pubkishes content for 10 UK and US websites. Links to all his material can be found on his own blog www.TomWinnifrith,com
Tom tweets alerts to all of his articles and a few other thoughts on life, saying exactly what he thinks with no holds barred. You can follow him on twitter @tomwinnifrith
