Forbes: LeBron Can Purchase Part of Knicks

[richboy]

Lebron knowing that his signing is goign to inflate the stock price and purchasing prior to his announcement is absolutely insider trading because he knows that his action, undisclosed to the PUBLIC, will affect the price.


It's the same as a an executive for Apple, knowing they're about to purchase Yahoo for example, going out and buying a bunch of shares before it's announced. That is called insider trading. Conversely selling your shares before announcing a bad quarter or some type of negative news that is no public is also insider trading.


If Lebron wants to announce he's going to the knicks, then buy stock after, it would be a little different. However, I have no idea how much of the stock for MSG is derived from Knicks value. But if Lebron is worth $150 million to a franchise, you can divide that by the # of outstanding shares and that's how much he's increasing the individual stocks.

Lastly, I don't expect this stock to jump through the roof by him signing. I do expect it to jump by random NBA fans thinking they're super smart and buying MSG stock which will increase the demand. But I don't think this is the get rich quick scheme some people are drooling over.

Your still using insider information that you only have because of your standing in the company. Lebron has no standing in the company. Some could make a case that the SEC would find a way but I just don't see any insider laws being violated.

Plus this whole thing is based on the assumption that the stock has this big boost in value with him signing. Which would have no clue how and why it would react that way.

That’s like you saying that me knowing that Apple is about to offer me a job and me buying stock in anticipation is no different than Bill Gates knowing he’s about to jump to Apple and buying stock in anticipation.

Bill Gates although retired is still the top shareholder and chairman of Microsoft. If he was to sell his shares and go to Apple it could be considered Insider because he be the top shareholder. Although it probably wouldn't go very far because he would gain nothing in the process.

[richboy]

All of the SEC , insider trading stuff is legit. But let's put that aside for a moment.

Do you know how many shares Lebron would have to buy @ $22.00 on the open market to make a serious amount of cash here?

It would be an astronomical amount that would actually saturate and possibly decrease the value of the stock.It would be shorted, saturated, possibly halted and in the end near impossible to double your money. You would be lucky to make 5%-10% then take into account capital gains taxes.

And at the end of the day.. ( yes putting aside the SEC/insider trading accusations) He would be taking regular peoples money and not being a shareholder/owner.

^^^^^^^

The idea that he is going to become absolutely wealthy by investing in MSG stock just because he will be there is pretty comical. He will not be making up any of the $30 million he could make by staying in Cleveland because the amount of shares, taxes, and length he would have to wait to make it worth it just is not worth it.

There is no extra 30 million by staying in Cleveland. I keep seeing some say that and its laughable. Only way he gets an extra 30 million from Cleveland is if someone is suggesting this will be Lebron's last big contract. In the reality even if he signed back with Cleveland he would probably have opt out clauses well before year 6.

The whole the home team can give more money because they can give the 6th year is really more based on older players looking for a last big pay day.

[Magilla_Gorilla]

All of the SEC , insider trading stuff is legit. But let's put that aside for a moment.

Do you know how many shares Lebron would have to buy @ $22.00 on the open market to make a serious amount of cash here?

It would be an astronomical amount that would actually saturate and possibly decrease the value of the stock.It would be shorted, saturated, possibly halted and in the end near impossible to double your money. You would be lucky to make 5%-10% then take into account capital gains taxes.

And at the end of the day.. ( yes putting aside the SEC/insider trading accusations) He would be taking regular peoples money and not being a shareholder/owner.

^^^^^^^

The idea that he is going to become absolutely wealthy by investing in MSG stock just because he will be there is pretty comical. He will not be making up any of the $30 million he could make by staying in Cleveland because the amount of shares, taxes, and length he would have to wait to make it worth it just is not worth it.

There is no extra 30 million by staying in Cleveland. I keep seeing some say that and its laughable. Only way he gets an extra 30 million from Cleveland is if someone is suggesting this will be Lebron's last big contract. In the reality even if he signed back with Cleveland he would probably have opt out clauses well before year 6.

The whole the home team can give more money because they can give the 6th year is really more based on older players looking for a last big pay day.

Did Lebron sign a three year deal, or a 4 yr max extension deal with a 3 yr opt out? Think carefully, its an important point.

Why do you think he signed the max extension with an opt out instead of just a three year deal?

Now why would Lebron sign for less if there is a chance he can still S&T and get the 6th year and 30 million?


No one knows if this will be Lebrons last contract. He's not leaving 30 million on the table if the Cavs are willing to sign and trade.

[BubbaTee]

You people realized this was written in a business magazine, right? A very famous one. Don't you think they'd know about insider training and all this mumbo jumbo before floating this possibility? C'mon now.

The scenario posited by Forbes and the scenario posited in this thread are different.

Forbes: Lebron can buy stock in MSG on the open market after joining the Knicks, at a time when knowledge of the Knicks' new asset (Lebron) is publicly available, and all members of the public have an equal chance to purchase the stock. After Lebron purchases the stock in this legal manner, his subsequent play could result in improved profits for MSG and thus increase the value of the stock that he holds, allowing Lebron to profit in addition to his regular NBA salary.

This thread: Lebron can buy stock before signing with NY while possessing insider knowledge that he will sign with the Knicks, which will then cause the stock to rise, thereby allowing Lebron to "game" the market and profit from non-public knowledge.

If the Forbes guy is endorsing the latter, then he is insane and will be fired. I don't think he is. However, people in this thread are endorsing the latter, so it's a good thing they aren't Lebron. Assuming they don't like pooping in toilets with no seats, of course.

Your still using insider information that you only have because of your standing in the company. Lebron has no standing in the company. Some could make a case that the SEC would find a way but I just don't see any insider laws being violated.

Insider trading does not require the trader to be an insider. The "insider" refers to having insider, aka secret, knowledge of some fact that will affect the value of the stock/bond/security being traded. In this case that fact would be Lebron's knowledge of where he was going to sign.

[Banks2Pierce]

I don't understand how you can discriminate based on talent. Is there some imaginary line that separates the players. What if Bosh bought MSG stock and then signed and then the share price went up 3 dollars in the next week and then he sold? Do you call that insider trading or is it in line with the volatility of the stock? It's a crazy line to walk, imo.

Or funniest scenario: if Scalabrine knew he was going to sign with the Knicks and shorted MSG a week before.

[richboy]

Did Lebron sign a three year deal, or a 4 yr max extension deal with a 3 yr opt out? Think carefully, its an important point.

Why do you think he signed the max extension with an opt out instead of just a three year deal?

Now why would Lebron sign for less if there is a chance he can still S&T and get the 6th year and 30 million?


No one knows if this will be Lebrons last contract. He's not leaving 30 million on the table if the Cavs are willing to sign and trade.

If Lebron wants to do a sign and trade I'm sure he be fine with doing it. I'm saying the idea that he looses 30 million if he leaves the Cavs ridiculous. He will get that year back unless he gets injured or God forbid died. Really Gilbert Arenas and Sam Bradford have shown that big contracts await even after injury as long as they aren't Shaun Livingston level.

Unless either of those things happen this isn't Lebron's last contract. Which to me is why the added length of the Cavs contract rather meaningless.

[Gus McCrae]

I don't understand how you can discriminate based on talent. Is there some imaginary line that separates the players. What if Bosh bought MSG stock and then signed and then the share price went up 3 dollars in the next week and then he sold? Do you call that insider trading or is it in line with the volatility of the stock? It's a crazy line to walk, imo.

Or funniest scenario: if Scalabrine knew he was going to sign with the Knicks and shorted MSG a week before.

Please read some of the examples in the last few pages it will make more sense to you.

[richboy]

You people realized this was written in a business magazine, right? A very famous one. Don't you think they'd know about insider training and all this mumbo jumbo before floating this possibility? C'mon now.

The scenario posited by Forbes and the scenario posited in this thread are different.

Forbes: Lebron can buy stock in MSG on the open market after joining the Knicks, at a time when knowledge of the Knicks' new asset (Lebron) is publicly available, and all members of the public have an equal chance to purchase the stock. After Lebron purchases the stock in this legal manner, his subsequent play could result in improved profits for MSG and thus increase the value of the stock that he holds, allowing Lebron to profit in addition to his regular NBA salary.

This thread: Lebron can buy stock before signing with NY while possessing insider knowledge that he will sign with the Knicks, which will then cause the stock to rise, thereby allowing Lebron to "game" the market and profit from non-public knowledge.

If the Forbes guy is endorsing the latter, then he is insane and will be fired. I don't think he is. However, people in this thread are endorsing the latter, so it's a good thing they aren't Lebron. Assuming they don't like pooping in toilets with no seats, of course.

Your still using insider information that you only have because of your standing in the company. Lebron has no standing in the company. Some could make a case that the SEC would find a way but I just don't see any insider laws being violated.

Insider trading does not require the trader to be an insider. The "insider" refers to having insider, aka secret, knowledge of some fact that will affect the value of the stock/bond/security being traded. In this case that fact would be Lebron's knowledge of where he was going to sign.

I need some examples. I would have to bet that there has never been an insider case for someone that never had some direct knowledge inside a company. Every insider case I've heard of there has been some level of direct communication between someone in the company. If you know some that don't then I be interested in hearing.

[Devin 1L]

There is no extra 30 million by staying in Cleveland. I keep seeing some say that and its laughable. Only way he gets an extra 30 million from Cleveland is if someone is suggesting this will be Lebron's last big contract. In the reality even if he signed back with Cleveland he would probably have opt out clauses well before year 6.

The whole the home team can give more money because they can give the 6th year is really more based on older players looking for a last big pay day.

While I agree with you about contract length, he would actually make a little bit more by staying with Cleveland due to 10.5% increases as opposed to 8% increases.

It's nothing too substantial, and certainly not $30 million, but it's probably like half a million per year.

It's also worth noting that the starting point for whatever contract he signs here in a few years is likely to be the tail end of the contract that he signs this off-season, so the higher the end of this contract, the higher the starting point of his next contract (absent some real drastic CBA change).

This isn't to suggest that he'd stay because of that -- just pointing out one difference however insignificant it may or may not be.

[richboy]

There is no extra 30 million by staying in Cleveland. I keep seeing some say that and its laughable. Only way he gets an extra 30 million from Cleveland is if someone is suggesting this will be Lebron's last big contract. In the reality even if he signed back with Cleveland he would probably have opt out clauses well before year 6.

The whole the home team can give more money because they can give the 6th year is really more based on older players looking for a last big pay day.

While I agree with you about contract length, he would actually make a little bit more by staying with Cleveland due to 10.5% increases as opposed to 8% increases.

It's nothing too substantial, and certainly not $30 million, but it's probably like half a million per year.

It's also worth noting that the starting point for whatever contract he signs here in a few years is likely to be the tail end of the contract that he signs this off-season, so the higher the end of this contract, the higher the starting point of his next contract (absent some real drastic CBA change).

This isn't to suggest that he'd stay because of that -- just pointing out one difference however insignificant it may or may not be.

Your right he does get that slightly more. One thing that he also could do is have a 3 year opt out which would allow him to get the full raises. The new CBA could change what those raises are so we would have to see about that.

[BubbaTee]

I need some examples. I would have to bet that there has never been an insider case for someone that never had some direct knowledge inside a company. Every insider case I've heard of there has been some level of direct communication between someone in the company. If you know some that don't then I be interested in hearing.

I'll look around, but most of the cases I know off the top of my head are ones that involve people inside the company. The only one I'm aware of that didn't was didn't was R. Foster Winans. Winans was a columnist for the Wall St Journal whose opinions often influenced stock prices, and he was convicted for leaking early copies of his column to certain investors, allowing them to get a "jump" on the market.

Lebron's case is fairly unique, in that most sports franchises are not publicly traded. I also can't recall ever hearing about a case where a team acquiring a single player was predicted to significantly increase the value of the entire franchise.

At any rate, the SEC doesn't require that the trader in an insider trading case be, or have direct contact with, a member of the company the stock is associated with.

The type of insider trading we discuss here is the illegal variety that most of us think of when we hear the term; the type of insider trading that... takes place when those privileged with confidential information about important events use the special advantage of that knowledge to reap profits or avoid losses on the stock market, to the detriment of the source of the information and to the typical investors who buy or sell their stock without the advantage of "inside" information.

http://www.sec.gov/news/speech/speechar ... pch221.htm

Lebron's knowledge of whether he's going to sign with the Knicks is confidential, not public. The scenario posited in this thread argues that Lebron signing with the Knicks is an important event. It then goes on to describe Lebron exploiting that confidential knowledge of an important event in order to reap profits on the stock market, giving him a special advantage over other investors not privy to that information.

[Gus McCrae]

If Lebron really wanted to and it was legal for him, he could buy a bunch of stock, announce he was going to the Knicks, then sell it and announce he changed his mind, then buy a bunch of stock again re-announce he was going to the Knicks, and then sign in Chicago. that would actually be funny...and illegal...but funny nonetheless.

[draft]

A lot of people have no idea what they're talking about. You have to be an INSIDER to be charged with insider trading.

Definition of "insider"
In the United States, for mandatory reporting purposes, corporate insiders are defined as a company's officers, directors and any beneficial owners of more than ten percent of a class of the company's equity securities.

Lebron is not breaking the law, he's just being a smart businessman. On the other hand, if James Dolan went out and bought a large amount of shares then he would get charged with Insider trading.

[panthermark]

A lot of people have no idea what they're talking about. You have to be an INSIDER to be charged with insider trading.

Definition of "insider"
In the United States, for mandatory reporting purposes, corporate insiders are defined as a company's officers, directors and any beneficial owners of more than ten percent of a class of the company's equity securities.

Lebron is not breaking the law, he's just being a smart businessman. On the other hand, if James Dolan went out and bought a large amount of shares then he would get charged with Insider trading.

No, you are wrong...and it has been explained to death. Heck, I have an article with court cases that show how wrong you are on the Bulls board....you don't have to work for said company.

But let me give you an example I just made up:

Let's say there is a huge pending court case regarding a company that wants to go forward with a new (but dangerous) product...or regarding some huge merger (that may or may not be a monoply)....the point being....the outcome of this could have a huge positive or negative impact on the stock of said company.

The JUDGE in this case goes out the day before....and buys $100,000 worth of stock in that company...and then rules on the case the next day. Now, that judge does not work for either company...but had MATERIAL KNOWLEDGE NOT AVAILABLE TO THE PUBLIC....he knew which way the case would go...and profited from it.

Are you trying to say that such a move is legal? Swap the judge with Bron, the company with MSG, and the ruling with his choice on July 1st.

There ya go...

[truth serum]

Dudes who are trying to say this isn't legal always seem to be a little unsure of themselves in their convictions. They say stuff like "do you really think the SEC would allow that?" or "do you really think he can get away with this?". If you are going to be so adamant about something, try ending your "statement" in something other than a question.

Meanwhile, the people who are SURE it is indeed legal, are just that: sure of themselves. Which means they actually know the answer.

Mr. "I have an entire article marinating on the Bulls board proving I'm right"- do yourself a favor and come to the Knicks board. We have a few lawyers and a couple of folks who know the CBA like the back of their hands who are positive LeBron and the Knicks can and will get away with it (not that this is anything fraudulent). Not to mention, Forbes Magazine. Google "Forbes".

Now I'm no lawyer, but I understand English well enough to wrap my mind around this. Those who are doubting the legality of it all are basing everything they've said on nothing but assumptions. The law clearly states you are wrong, so I don't understand the uncertainty around it aside from the fact that you may not want it to be true. For that, I'm very sorry.

[draft]

A lot of people have no idea what they're talking about. You have to be an INSIDER to be charged with insider trading.

Definition of "insider"
In the United States, for mandatory reporting purposes, corporate insiders are defined as a company's officers, directors and any beneficial owners of more than ten percent of a class of the company's equity securities.

Lebron is not breaking the law, he's just being a smart businessman. On the other hand, if James Dolan went out and bought a large amount of shares then he would get charged with Insider trading.

No, you are wrong...and it has been explained to death. Heck, I have an article with court cases that show how wrong you are on the Bulls board....you don't have to work for said company.

But let me give you an example I just made up:

Let's say there is a huge pending court case regarding a company that wants to go forward with a new (but dangerous) product...or regarding some huge merger (that may or may not be a monoply)....the point being....the outcome of this could have a huge positive or negative impact on the stock of said company.

The JUDGE in this case goes out the day before....and buys $100,000 worth of stock in that company...and then rules on the case the next day. Now, that judge does not work for either company...but had MATERIAL KNOWLEDGE NOT AVAILABLE TO THE PUBLIC....he knew which way the case would go...and profited from it.

Are you trying to say that such a move is legal? Swap the judge with Bron, the company with MSG, and the ruling with his choice on July 1st.

There ya go...

You're still wrong. Lebron is not an insider in the Knicks parent company.

[bri]

You're still wrong. Lebron is not an insider in the Knicks parent company.

You don't have to work for a company to be busted on insider trading. If you have material information that is not public and you act on it before it becoming public you can be charged with insider trading.

http://www.sec.gov/answers/insider.htm
Examples of insider trading cases that have been brought by the SEC are cases against:

Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;

Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information;

Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;

Government employees who learned of such information because of their employment by the government; and

Other persons who misappropriated, and took advantage of, confidential information from their employers.

[towelie]

You're still wrong. Lebron is not an insider in the Knicks parent company.

You don't have to work for a company to be busted on insider trading. If you have material information that is not public and you act on it before it becoming public you can be charged with insider trading.

http://www.sec.gov/answers/insider.htm
Examples of insider trading cases that have been brought by the SEC are cases against:

Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;

Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information;

Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;

Government employees who learned of such information because of their employment by the government; and

Other persons who misappropriated, and took advantage of, confidential information from their employers.

No, you're wrong, and draft is correct.

From the same SEC site:

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

LeBron is not an insider, period. He has no fiduciary duty to MSG or the parent company's shareholders. In all the examples listed on the SEC website, the duty is imputed to outsiders if they received their confidential information from an insider, or the information was received in violation of some trust or confidence. This isn't to say that the SEC won't try and find a way to pin LeBron for insider trading, as there may still be an argument that he is a constructive insider, because of his intent to join the organization. It'll certainly make an intersting court case.

But those citing US v. Carpenter, which was the case in which the Wall Street Journal editor, who realized his columns affected stock price (and then tipped information from his upcoming column before it was published), is not entirely applicable here, despite involving an outside with no fiduciary duty to the company's shareholders. The argument there was a misappropriation theory, in that the information was obtained fraudulently, or in violation of some trust.

You're missing the key component of insider trading law in that a fiduciary duty must have been breached. Just having material non-public info and acting upon it is perfectly legal, as long as such info was not received from an insider or fraudulently obtained.

Like I said earlier though, this is a pretty unique situation in which a person can increase the value of a stock just by joining the corporation. I tried to find similar situations in the past (ie. high-profile CEO's whose hiring may have helped boost a stock) but the case law seems pretty minimal on it. If I were LeBron's lawyer, or at least PR rep, I'd advise against buying stocks before joining, cause the last thing LeBron needs is a legal battle to distract from his NBA career. It's still valuable for him to buy the stocks after joining, since he, as a member of the team, has indirect control over how well the stock can do, thereby minimizing the risk in his investment.

[towelie]

No, you are wrong...and it has been explained to death. Heck, I have an article with court cases that show how wrong you are on the Bulls board....you don't have to work for said company.

But let me give you an example I just made up:

Let's say there is a huge pending court case regarding a company that wants to go forward with a new (but dangerous) product...or regarding some huge merger (that may or may not be a monoply)....the point being....the outcome of this could have a huge positive or negative impact on the stock of said company.

The JUDGE in this case goes out the day before....and buys $100,000 worth of stock in that company...and then rules on the case the next day. Now, that judge does not work for either company...but had MATERIAL KNOWLEDGE NOT AVAILABLE TO THE PUBLIC....he knew which way the case would go...and profited from it.

Are you trying to say that such a move is legal? Swap the judge with Bron, the company with MSG, and the ruling with his choice on July 1st.

There ya go...

The judge will be charged with insider trading under the misappropriation theory.

Here are the Court's words from US v. O'Hagan:

The "misappropriation theory" holds that a person commits fraud "in connection with" a securities transaction, and thereby violates 10(b) and Rule 10b-5, when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information.

There is a trust or duty of confidentiality created that the judge will not act or misappropriate information that he obtained from parties in a litigation, for his own financial gain. By breaching that, the judge will be jailed, plain and simple.

Explain to me how this applies to LeBron's situation.

[richboy]

A lot of people have no idea what they're talking about. You have to be an INSIDER to be charged with insider trading.

Definition of "insider"
In the United States, for mandatory reporting purposes, corporate insiders are defined as a company's officers, directors and any beneficial owners of more than ten percent of a class of the company's equity securities.

Lebron is not breaking the law, he's just being a smart businessman. On the other hand, if James Dolan went out and bought a large amount of shares then he would get charged with Insider trading.

No, you are wrong...and it has been explained to death. Heck, I have an article with court cases that show how wrong you are on the Bulls board....you don't have to work for said company.

But let me give you an example I just made up:

Let's say there is a huge pending court case regarding a company that wants to go forward with a new (but dangerous) product...or regarding some huge merger (that may or may not be a monoply)....the point being....the outcome of this could have a huge positive or negative impact on the stock of said company.

The JUDGE in this case goes out the day before....and buys $100,000 worth of stock in that company...and then rules on the case the next day. Now, that judge does not work for either company...but had MATERIAL KNOWLEDGE NOT AVAILABLE TO THE PUBLIC....he knew which way the case would go...and profited from it.

Are you trying to say that such a move is legal? Swap the judge with Bron, the company with MSG, and the ruling with his choice on July 1st.

There ya go...

That probably isn't legal but I doubt that is insider trading. I think there is probably more serious laws being broken here since the guy is a judge. I would think there are bigger rules in place for judges, senators, and other public officials who create law which could effect the value of a company.

I would say it more like this. Lets say I discover a way to make Pepsi a clean burning fuel. Before introducing this to the world I buy stock in Pepsi. I introduce this to the world and Pepsi stocks go threw the roof. Now did I break a law. IMO I didn't break the law because I'm not working for Pepsi. I had no inside information. I had outside information that could change the value of Pepsi stock. That would be based really on my own opinion. However, lets say another guy discovers a new Pepsi flavor. He decides to buy stock too and then introduce it the next day. The stock does nothing. Did he do insider trading? Is insider trading based solely on if you make a profit?

My bet that if this happened this would go all the way to the Supreme court. I'm not sure anyone on this board could say this is insider trading or not. I've never heard of an outsider getting charged with insider trading. What if I was Psychic and I knew that a company that I invested a lot in was about to announce something that would drastically effect its value. Did I break the law?