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The idea is to make
this offer available to all stockholders. So if they say we want to buy
30%, but we could not buy out the premium, and so many stockholders
offered to sell so that they receive offers that would total 60%. That
would accommodate everybody, so you will only pro-rate. You will buy
only ½ of what each one is offering to sell. In other words, you have
to spread the bounty to everybody.
Then,
to prevent unfair use of information which might have been
obtained by the owner, director or officer, any profit he realized from
the purchase and sale or sale and purchase of equity of the corporation
within a period of six months will be recoverable by the corporation
unless he acquired it in good faith because of previously contracted
debt. In other words, debt was converted into equity. So if he is a
director, he bought shares and sold them at a profit within 6 months, he
has to account for that to the corporation. That is a shortswing
profit. This was asked when Justice Quiason was the chairman.
And the
Code contains prohibitions of manipulations of securities.
Illegal to:
- Create a false
appearance of active trading by effecting any transaction which
involves no change in beneficial ownership. He places an order
to buy shares. He places an order with another broker to sell
shares. Sa kanya rin yun. Or he places an order to buy a
certain number of shares at a certain price, knowing that an order
to buy the same number of shares same price will be send. In other
words, they will match.
- Enter into
series of transactions which will raise the price of securities to
induce others to buy or to depress, or to induce people to sell or
to create this impression of active trading to induce people to buy.
What happened to Tawas Minerals before, the stockholders were buying
and selling among themselves. Manipulate the market to make it
appear that the price was going up. And the public not knowing any
better started buying so they get unloaded with shares. Then they
disappeared afterwards.
- Circulate or
disseminate information that the price of any such security listed
will likely to rise or fall because of manipulative market
operations.
- Make false
statement to induce the purchase or sell of securities.
- Fix the price
of securities.
Then
fraudulent transactions are also prohibited. It is illegal to
buy, to employ any device, to defraud, obtain money through any untrue
statement that negates or instructs any transaction operate as fraud.
Then
you have insider trading. Seems to be an old practice. You will
recall this was what happened in the Battle of Waterloo. The
Rothschilds had a runner. So he ran from Waterloo in Belgium to London,
“Napoleon lost!” So the Rothschilds started buying the shares of stock
in the market so that when the news finally reached London that Napoleon
lost, the price of share went up and they unloaded their holdings. In
more recent times, you have Michael Milken, Rexel (? Am really bad
with names, sorry.) When they were the ones handling these leverage
buy-outs. They look for companies which are valuable but their true
value is not being appreciated in the market. Then they’ll be targeted
for a buy-out. Somebody will offer to buy these shares for a premium.
That’s why leverage, you’ll have to borrow, to finance these massive
purchases. And then the buyer after that will normally start selling
some of the assets of the corporation to be able to raise money to pay
back the bank and recover what it spent. Now this Michael Milken, 26
times, he bought shares which were targeted for take-overs. He denied
there was insider trading saying that he analyzed the financial
statements and knew that this was a good investment. Too much of a
coincidence. He made more than a billion dollars but eventually pleaded
guilty. He returned all the profits he made he was sent for about 10
years in jail. He got out after 5 years.
The law defines what is an insider:
- The issuer or
corporation who sold the share
- A director or
officer
- A person whose
relationship or former relationship to the issuer gives him access
to material information not available to the public. Like
here’s a lawyer who is asked to attend the board meetings because
there are legal questions that may be propounded by the directors.
And because of that he learns that the board will declare 30% cash
dividend. So he’s an insider.
- A
government employee, officer of SEC. Or an officer of
exchange, who has access to material information not available
to the public.
- A person who
learns of such information from any of the foregoing. Like here
is a director who tells his brother-in-law, “Oh, mag-de-declare kami
ng 30% cash dividend, bumili ka na.” So the brother-in-law is also
an insider.
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