Now SAC Is Being Investigated By The SEC For Insider Trading In A $15 Billion Biotech Takeover

steve cohen

SAC Capital is being investigated by the SEC over trades of MedImmune stock prior to its multi-billion takeover by AstraZeneca in 2007.

The SEC’s probe of Steve Cohen’s giant hedge fund is “part of a broad SEC inquiry into trading by various hedge funds, including SAC and its affiliated funds, in stocks connected to some of the biggest health-care deals of the past decade,” the WSJ reports.

When MedImmune’s acquisition was announced in April, 2007, the stockprice surged 18%.

“Trading was heavy before the announcement, driving shares up more than 50% over six weeks, suggesting that rumours of a deal may have reached traders ahead of the announcement,” the WSJ, reported.

Neither the firm nor Cohen has been accused of wrongdoing, and it’s important to remember that unlike many other hedge funds, SAC portfolios are run by a host of different managers who are allowed significant independence to trade.

According to the WSJ,

MedImmune’s takeover by AstraZeneca PLC is one of several big health-care deals the SEC has been investigating for at least 18 months…  The health-care trades being examined by the SEC involved stock in companies engaged in mergers and acquisitions.

The trades that the SEC is focusing on are:

  • SAC upped its MedImmune stake from 151,000 shares in Q4 of 2006 to 796,000 shares in Q1 of 2007. In Q2, it reduced its stake to 30,000 shares, then divested of the stake entirely.
  • CR Intrinsic (a division of SAC) owned no MedImmune stock in Q4, 2006. It held 950,000 shares in Q1 of 2007, then divested by Q2.
  • Walter Capital Management (an SAC division now called SAC Global Investors) owned no MedImmune stock in Q4 of 2006. It held 550,000 shares in Q1 of 2007’s first quarter.

This probe is separate from the investigation being spearheaded by Senator Grassley, and one being carried out by federal prosecutors in New York over Cohen’s private trading account.

One well-known SAC investor recently exited the hedge fund because of the government’s continued focus on the firm: “the government seems so intent now in getting [SAC] and there are additional SAC-related characters tainted,” the investor said.

And that was before this latest probe was revealed.

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