Suspicious returns trigger insider trading suit following $11.6B Bioverativ deal

Regulators at the SEC are sounding an alarm following suspicious trading activity that went down days before Sanofi’s $11.6 billion buyout of hemophilia drugmaker Bioverativ.

The agency has filed a lawsuit in the federal district court in Manhattan against one — or possibly many — unknown traders, alleging insider knowledge led to massive profits on the acquisition deal. The lawsuit seeks an order that would force Credit Suisse, the global bank that processed the trades through an account in Zurich, to disclose the names of the trader(s).

In the purchase that raised red flags for regulators, traders paid about $170,000 for options that earned them about $4.9 million after the acquisition announcement. That would be a 2,900% return in less than two weeks.

When Sanofi $SNY agreed to purchase Bioverativ $BIVV in the biggest biotech M&A deal so far in 2018, the smaller company’s stock price soared over 60% and its market cap climbed from $6.8 billion to over $11 billion.

Apparently, traders wanted to take advantage of those gains. The transactions in question were weird on a few levels. First, the traders bought call options that had a strike price between $65 and $70 per share. That’s an unusual move for a trader, because shares of Bioverativ had never closed above $64.12. Why buy call options at a premium?

The other strange thing about this move was the call options had an expiration date of February 16, which means the buyers expected the share price to go up in a very short time. Last weird thing? The traders had never owned Bioverativ stock before.

Other than forcing Credit Suisse to cough up the defendants’ names, the SEC is seeking an order that would freeze the traders’ assets. They’re also asking that the traders hand over profits and pay fines.

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Sr. Manager, Regulatory Affairs, CMC
CytomX Therapeutics San Francisco, CA
Marketing Associate - Demand Generation
Catalytic Data Science Charleston, SC
Associate Principal, Life Sciences Partnerships
Flatiron Health New York City or San Francisco

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