WASHINGTON--The Securities and Exchange Commission has frozen
the assets of a group of unnamed traders who earned $4.6 million in
potentially illegal profits by trading Onyx Pharmaceuticals Inc.
(ONXX) before the cancer drug-maker rejected an unsolicited
acquisition offer from rival Amgen Inc. (AMGN).
The SEC said late Wednesday it had successfully obtained a court
order to freeze the assets of the unidentified traders who
purchased risky call options in the three days before Onyx's Sunday
announcement that it had received but rejected Amgen's offer and
was putting itself up for sale. The $4.6 million in profits were
based on an investment of just $305,000.
In a release, the SEC said the size and timing of the options
trades "were highly suspicious because they constituted large
increases over the historical volume for those call options
purchased."
The SEC believes that the traders were in possession of
material, nonpublic information about the offer to acquire Onyx at
a substantial premium over the stock price. The options gave the
traders the ability to purchase Onyx shares at a pre-set "strike"
price of between $80 and $92.50 per share, options that
dramatically increased in value after the company announced it was
rejecting the unsolicited offer. Its stock surged Monday, closing
at $131.33, 51% above its Friday close.
In court documents, the SEC said the traders used omnibus
accounts at Citigroup Inc. (C) and Barclays PLC (BCS), and said the
traders or their accounts are located in the Canary Islands and
Beirut.
"This action demonstrates that the SEC will not hesitate to
freeze the assets of suspicious foreign traders when the timing and
size of their trades indicate that they were misusing inside
information, and use of foreign accounts will not dissuade us,"
said Michele Wein Layne, Director of the SEC's Los Angeles regional
office.
A spokeswoman for Onyx declined comment. Citi and Barclays
spokesmen couldn't immediately be reached for comment
In rejecting the roughly $10 billion offer on Sunday, Onyx said
Amgen "significantly undervalued Onyx and its prospects, and was
not in the best interest of Onyx or its shareholders."
Write to Andrew Ackerman at andrew.ackerman@dowjones.com
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