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ATI acquisition under insider trading microscope

by Sylvie Barak on 18 November 2009, 10:13

Tags: AMD (NYSE:AMD), ATi Technologies (NYSE:AMD), GLOBALFOUNDRIES

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According to a report in Dow Jones, the hedge fund manager in the eye of the insider trading storm, Galleon Group, bought up huge amounts of ATI stock and call options before AMD made a bid for the graphics firm in July 2006.

Dow Jones says regulatory filings with the Securities and Exchange Commission (SEC) show that Galleon Group founder, Raj Rajaratnam, doubled his investments in ATI during Q2 of 2006, going up from owning 3.3 million shares on March 31 to 8.5 million ATI shares. By June 30, 2006, the firm also purportedly owned call options on 31,266 shares, way up from just 4,350 call options on March 31.

By June 30, Galleon was holding more ATI equity than that of any other firm, a whopping $124.5 million, not including the options, say the SEC records.

Then, on July 24, 2006, AMD made its move and snapped up ATI at a rather pricey 24 per cent premium when compared to its previous trading day's closing price. Unsurprisingly, ATI shares shot up 19 per cent, and proceeded to gain in value throughout the remainder of July, gaining over 35 per cent.

During the latter half of July, when AMD's bid for ATI was made public, Galleon Technology saw a 6.6 per cent gain, way outperforming the 2.5 per cent loss of the CISDM Technology Index. Indeed, that nine point margin was the fund's best one-month performance against the index since 2004.

To date, the federal authorities looking into the case have only charged Rajaratnam with two subsequent incidences of insider trading, based on information gleaned from a certain AMD executive. Galleon's stockpiling of ATI shares just before an AMD buy-out has not yet been cited as a criminal charge.