SAC Capital is obvious case of using inside info to make money. Get inside info and trade on it. Did Cohen really think nobody would notice? But there have to be other ways to use inside info to make money, especially for insiders. Let's say you're an insider, the CEO or another employee with access to info. How to legally make money, other than doing your job?
Some possible ways:
a) sandbag results ahead of positive info. Save good info for future quarters. Load expenses into Q1, depress the stock, issue yourself shares/options, announce new contract, then announce better results in Q2. Profit. This happens too often to count.
b) the Global Crossing scheme. Hype the stock, sell shares, get out. Crude but effective.
c) acquire bogus company (Mattel/Learning Co). Announce acquisition of known fraudulent company for low price. Stock soars. Sell shares. Announce discovery of fraud. Blame fraud on acquired company.
d) use subsidiaries to buy shares in own co. This is the Warren Buffett approach. He would use insurance subs to buy shares in Berkshire, concealing the self-dealing. Results improve, stock squeezed. Sell shares. Repeat.
e) Announce large deal with supplier. Short shares. Cancel deal. Profit. An Apple insider could have done this with GTAT. Not even necessary to cancel deal. Supplier incompetence is enough.
f) hype then short shares. Hype the stock. At the same time, buy puts. Stock falls on bogus hype, profit off puts. The Rainforest Cafe did this, it bought puts on its own stock.
g) Enron strategy. Use subsidiaries to buy shares, shares rise, profits rise, stock rises. Repeat until stock falls and somebody goes to jail.
Some possible ways:
a) sandbag results ahead of positive info. Save good info for future quarters. Load expenses into Q1, depress the stock, issue yourself shares/options, announce new contract, then announce better results in Q2. Profit. This happens too often to count.
b) the Global Crossing scheme. Hype the stock, sell shares, get out. Crude but effective.
c) acquire bogus company (Mattel/Learning Co). Announce acquisition of known fraudulent company for low price. Stock soars. Sell shares. Announce discovery of fraud. Blame fraud on acquired company.
d) use subsidiaries to buy shares in own co. This is the Warren Buffett approach. He would use insurance subs to buy shares in Berkshire, concealing the self-dealing. Results improve, stock squeezed. Sell shares. Repeat.
e) Announce large deal with supplier. Short shares. Cancel deal. Profit. An Apple insider could have done this with GTAT. Not even necessary to cancel deal. Supplier incompetence is enough.
f) hype then short shares. Hype the stock. At the same time, buy puts. Stock falls on bogus hype, profit off puts. The Rainforest Cafe did this, it bought puts on its own stock.
g) Enron strategy. Use subsidiaries to buy shares, shares rise, profits rise, stock rises. Repeat until stock falls and somebody goes to jail.