Despite ASX compliance rules and pages & pages of Corporations law, it seems some insiders are getting away with trading before market sensitive information becomes public.
Here's the most recent case…
Techniche Limited (ASX: TCN) saw its shares jump 18.8% today, including a move to 9.9 cents at the open, from a close of just 8 cents overnight. Responding to an ASX query over the price and volume jump, Techniche says it "has received an unsolicited, non-binding expression of interest concerning the sale of some of the company's assets. Discussions concerning the matter are still at a very preliminary stage."
The offer could make a material difference to Techniche's share price, pushing it much higher.
Clearly, some people appear to have become aware of the offer prior to Techniche releasing its explanation to the ASX and sought to profit by buying shares first thing this morning.
One wonders if the corporate cop, the Australian Securities and Investments Commission (ASIC), will investigate closely – although ASIC only seems to worry about high profile issues and only when they hit the front pages of the major newspapers. Maybe taking action in cases like this would send a clear signal to the smaller companies on the ASX, which often seem to have problems keeping sensitive information private until it is announced to the ASX.
Here are a few questionable moves prior to market sensitive announcements from smaller listed ASX companies in just the past year or so…
April 2, 2015 – Shares in Bradken Limited (ASX: BKN) spike 21% before trading is halted. The company then announces that it has received a new takeover offer.
March 11/12, 2015 – Shares in iiNet Limited rise 8% despite going ex-dividend on March 12. The next day the company announces it has received a takeover offer from TPG Telecom Ltd (ASX: TPM).
February 11, 2015 – Shares in Alkane Resources Ltd (ASX: ALK) rise 19.7% before the company calls a trading halt. The company then announces that the Planning Assessment Commission has recommended that Alkane's Dubbo Zirconia project can be approved.
January 22, 2015 – Donaco International Ltd (ASX: DNA) sees its share price sink 12.8% before the company goes into a trading halt. The company then announces that it is going to raise $132 million from existing shareholders at a 19.4% discount to its 30 day average price, and a 10% premium to the closing price on January 22.
July 30, 2014 – The share price of brewer Gage Roads Brewing Co Limited (ASX: GRB) rises 13% on big volumes before the company announces a positive trading update on July 31, 2014.
There are plenty more examples, and many that simply go undiscovered. There may be reasonable explanations for all, but that might be stretching one's imagination.
One has to wonder what the purpose of the ASX's price query really is if no further action is taken. Surely it should be fairly simple to see who was buying shares in Techniche at the open and investigate whether they had any insider information?
Foolish takeaway
I don't expect any action to be taken by either the ASX or ASIC in Techniche's case, given the regulator's lack of history in following up price queries previously. Maybe it's time they begun before investors lose faith in them – if they haven't already.
