Regulators from the U.S. Securities and Exchange Commission have started a formal inquiry into unusual stock trades they said took place prior to the deal to purchase the food company H.J. Heinz. Those trades have raised some questions about whether illegal activity took place surrounding one of the largest acquisition deals in recent memory.
SEC regulators started their inquiry over possible insider trading on Thursday as investment firm 3G Capital and Berkshire Hathaway came to an agreement to purchase the food company for the price of $72.50 a share. Regulators said on Wednesday they started to notice a jump in suspicious stock trading.
If the SEC decides the inquiry should continue to a broader full blown investigation, it could create a dark cloud over the pending deal. If it were to go forward, SEC authorities would be looking at the limited amount of insiders who could have tipped of investors over the deal.
The SEC inquiry will center round options trading activity at Heinz that jumped at mid week once news began to circulated that a deal was pending. Call options used by investors give the investor the chance to bet on a stock without becoming fully committed to purchasing shares, but rather he or she is given the opportunity to purchase at a future date at a set price.
Those options, as of Tuesday, showed very little activity in Heinz, but starting Wednesday morning, as the final touches were being done to the big deal, a spike in options trading started.
Attention is being focused on that sudden increase in trading on options during Wednesday trading.