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The Sanofi-Chattem Deal: What Insider Trading Looks Like

The SEC appears to have made what looks like the easiest insider trading case imaginable against two French men who allegedly traded on information they had regarding Sanofi-Aventis (SNY)'s acquisition of Chattem (CHTT).

But that's not the only signal that someone may have been trading ahead of time on leaked news that there was something going on with Chattem: The volume in Chattem trading more than doubled the business day before the merger was announced. It had been flat all week prior to the announcement.

The SEC alleges that Nicolas Patrick Benoit Condroyer and Gilles Robert Roger bought 2,910 call options on Chattem shares between Dec. 7 and Dec. 17. Chattem was trading at around $70. On Dec. 21, Sanofi announced it was acquiring Chattem for $93.50 per share. The same day, the two men allegedly sold all their options for $4.2 million in profit.

As the press release archly puts it, "The SEC filed insider trading charges against them the very next day."

Their activity may not have gone unnoticed. This chart (click to enlarge) of Chattem's closing stock prices shows that shares didn't jump until the day of the announcement. So far, so kosher. But if you go to Yahoo Finance's Chattem page and roll over the two trading days before the sale you find that trading volume in Chattem leaped from 133,200 on Dec. 17 to 315,600 on Dec. 18. Coincidence?

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