Regulator Scrutinizes Trades Before Anadarko Deal Announcement

Date : 04/29/2019 @ 11:14PM
Source : Dow Jones News
Stock : Chevron Corp. (CVX)
Quote : 122.93  1.54 (1.27%) @ 9:00PM

Regulator Scrutinizes Trades Before Anadarko Deal Announcement

Chevron (NYSE:CVX)
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By Micah Maidenberg 

Traders used insider information to turn a profit of about $2.5 million related to the sale of Anadarko Petroleum Corp., according to the Securities and Exchange Commission on Monday.

The trader or group of traders who executed the transactions are currently unknown to the SEC. However, the agency said it had obtained a court order to freeze assets related to the alleged trading based on nonpublic information tied to Chevron's proposed $33 billion merger with Anadarko and Occidental Petroleum Corp.'s $38 billion offer for the company.

Between February 8 and April 1, the traders purchased 1,650 call options, which gave the trader or group of traders the right to buy Anadarko shares at a set price for a certain period, according to a lawsuit the SEC filed in federal court in New York.

Chevron delivered its offer to Anadarko on February 6, the SEC said in the lawsuit. Anadarko was also in discussions, starting in March, with Occidental Petroleum Corp., which offered last week to acquire Anadarko for about $38 billion.

Media representatives for Anadarko and Occidental didn't respond to requests for comment. A Chevron spokesman declined to comment. The oil companies aren't named as defendants in the SEC's suit.

The judge overseeing the case signed off on an order freezing assets related to the trades, according to court records.

In two brokerage accounts, the unknown traders purchased equity call options in Anadarko shares.

For example, in one account, a trader bought 650 call options in Anadarko shares on April 1 for about $70,000. Those options allowed the owner to acquire the oil company's shares for $50 a share, according to the SEC. That same day, leaders at Occidental and Anadarko were scheduled to meet.

On April 12, the news that Chevron would acquire Anadarko became public. Shares of Anadarko closed at $61.78 that day, up roughly 32% from the previous day.

Three days later, the owner of the call options bought on April 1 exercised them, giving the trader the right to buy 65,000 Anadarko shares at the lower price, according to the SEC, allowing the holder of the options to earn a profit of $727,350, less commissions.

On Monday, shares of Anadarko closed at $72.93 after the company said it would resume talks with Occidental.

Write to Micah Maidenberg at micah.maidenberg@wsj.com

 

(END) Dow Jones Newswires

April 29, 2019 17:59 ET (21:59 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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