Insider trading of competitors' stock?

ProPublica has a detailed article about CEOs making a lot of money from very timely trades of the stock of their competitors.

August Troendle, CEO of Medpace sold $1.1M worth of shares of his competitor Syenos the day before a restructuring caused their shares to plunge.

Isaac Larian, CEO of MGA Entertainment, has traded shares of competitors Mattel and Hasbro for years. In July 2017, he sold $1.4M in Mattel shares the day before they announced sales drops that led to a 24% stock decline.

Gerald Boelte, chairman and founder of oil company LLOG Exploration, made very well-timed trades of competitor Stone Energy

Steven Grossman, an executive at Southern Container Corp. made extremely savvy trades of competitor Temple-Inland


It’s a loophole in the insider trading rules. An executive isn’t allowed to trade his own stock based on his insider knowledge of how business is going for HIS company. But that executive IS permitted to make an assumption that other companies in his industry have similar business results and using that assumption IS permitted to trade those stocks (assuming he has no insider information about that other company).

And there is an inherent problem with this kind of study. It shows 4 very successful trades by executives. But there is no way for us to know if there might have been another 400 or 4000 such trades, based on assumptions of how a competitor is doing, that result in heavy losses (due to an incorrect assumption, and the other company is performing differently than their company).


The amounts are small for executives.

The timing is excellent. Yes that is why a CEO is a CEO. Timing skills are a must.

You did not believe your brown bagging heavy drinking stockbroker who said no one can time the market? I hope you did not think that was some sort of knowledge.

I have a friend who is a CEO. He reads financials left and right. He knows what to use and not use as information. He is excellent. I am not suggesting he does anything at all wrong. I am saying he sees a storm and gets out. He is just about always right. He knows money.


Matt Levine mentioned this. SEC is going after egregious cases. We will see.