According to the U.S. attorney, after receiving a tip that pharmaceutical companies Elan and Wyeth would soon disclose negative Alzheimer drug trials tests in late July 2008, Martoma of SAC Capital is alleged to have told SAC's owner to liquidate the fund's position in both companies' shares.
SAC did so via its head trader and a massive selling program of over 10.5 million Elan shares over a span of four days. The U.S. attorney says in its charge that SAC Capital's selling represented over 20% of the reported trading volume in Elan's shares and 11% of the volume of Wyeth's shares in the seven trading days prior the disclosure of negative drug trials.
Still, emails floated between a SAC trader who executed the sale, the fund's owner and Martoma show that SAC Capital felt its selling had gone undetected by the wider market. The main reason: the use of trading algorithms and dark pools.
"We executed a sale of over 10.5 million ELN for
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV