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Sunday, May 11, 2008 --- 73 days ago http://pennyherscher.blogspot.com/2008/05/icahns-options-strategy-to-skirt-anti.
| In follow up to my recent post that activism is on the rise - I saw a fascinating piece on Bloomberg recently on a detailed anti-regulatory strategy used by activist investors like Norman Peltz and Carl Icahn -- in which they use options to avoid ownership disclosure rules that the U.S. Fair Trade Commission oversees. For those who don't eat-and-sleep the regulations, activist investors essentially need to file with the FTC and notify the firm itself when they cross over the threshold of owning more than $63M of a firm's shares. They then must wait for FTC approval before continuing to accumulate a position. Passive investors face a more lax collar, and can own up to 10% of a firm before filing with the FTC. These FTC reporting rules are in addition to the SEC's Form 13D , which must be filed within 10 days of an investor acquiring more than 5% of a firm's shares. The article details transactions in which Icahn purchased options from Goldman Sachs to buy MOT's stock -- rather than the shares themselves -- as he prepared for a rapid accumulation of stock. This essentially put him in a position of being able to pounce on the company, but without disclosing that he was on the verge of doing so. It's a gray area for regulation, though Jeffrey Zuckerman, who brought cases against this practice in the 80s, is quoted as saying that the FTC "looked at [the practice] back in the 1980s and, rightly or wrongly, concluded at the staff leve ... |
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