One Call From a Buyer

The chairman of a computer-services company had rejected a takeover approach from a larger software firm. The software firm's chief executive later phoned him, saying it would not buy his company for now but would instead announce a deal with another company; he gave no details of the terms or structure. The next morning the chairman bought 15,000 shares of that other company through two brokerage accounts. Two days later the software firm announced a tender offer at $24 a share, and he sold that afternoon for a profit of about $149,000. Prosecutors charged him with trading on inside information about a tender offer. The defence argued he had not been told the deal was a tender offer and did not realise he was doing anything unlawful.