insider trading question

  1. 13 Posts.
    A company's shareprice is say 15 cents

    The company issues a prospectus to raise cash.

    The new shares are issued at say 10 cents

    A few days PRIOR to the issue of the Propspectus a company associated with one of the Directors sells a few hundred thousand dollars worth of the company's stock at 15 cents.

    This same Director signed off on the prospectus.

    He obviously knew that the company was going to issue a prospectus at a lower shareprice.

    Therefore he obtained a significant benefit by selling these shares at a significant premium and shortly before the prospectus was issued.

    He would obviously know that the effect of issuing the Prospectus would be to reduce the share price.

    If the people that bought these shares had known that a Prospectus was going to be issued with shares at a significant discount to current prices I would have thought that they would not have bought these shares.

    Does this constitute insider trading behaviour by the Director?

    I would appreciate some views on this question.


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