The AFR noted earlier this week that ASIC plans to spend $30 million to create a significant new share-trading surveillance system to detect insider trading and market manipulation. If the last few weeks’ activities are anything to go by, the new system can’t be installed soon enough.

In recent days, ABC Learning, Toll, QBE and Transurban have announced significant deals or profit upgrades which positively affected their respective share prices. But in each case, it seems, some people were already in on the act, with the share prices of all four companies increasing sharply in the two weeks before the announcements were made.

Company/
Announcement

Share price on 1 December 2006

Share price immediately prior to announcement

Increase in 13 days prior to announcement

ABC Learning Centres — Expansion into US and UK

$7.40

$7.85

5.4%

Toll — Restructure

$16.55

$18.25

10.27%

QBE Insurance — US acquisition and profit announcement

$25.25

$26.25

3.96%

Transurban — Sydney Roads merger

$7.30

$7.69

5.34%

6.24%

 

This particular “Insider Trader” portfolio would have returned a very healthy 6.24% in less than two weeks – or an annualised return of 162%.

One investment banker commented to Crikey that it is almost impossible to do a deal these days without the share price spiking before the deal is announced.

We can only wish ASIC’s new insider trading team the best of luck. If last week is any guide, they’ll certainly be very busy.

Peter Fray

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