For Icahn, ImClone Purchase Was a Good Thing

[R. A. Hettinga]

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This *this* boys and girls, is *exactly* why "insider" trading laws
are just so much statist happy horseshit.

As we see below, one woman's trash is another man's treasure, and
*nobody* knows which is which, no matter *how* much "inside"
information they have.

As in anything else, *nobody* can calculate the future value of
information, "inside" or otherwise. The value of *anything* can
*only* be *discovered* in a free market, and not calculated, in mind
or machine, much less legislated by vote, fiat, or anything in
between.


Even in the worst cases, so-called "insiders" know just as much as
you or I do about the future value of any stock, including that of
their own companies: exactly nothing.

"Insider" trading regulation wasn't even *promulgated* until the
early 1960's, at the height of government hubris about it's ability
to "regulate" everything. Something that has been shown, from the
price of gold, to the price of gas, to the availability of airline
seats, to be evil, if not stupid.

In the case of "insider" trading, just because you have information
about shareholder positions in almost realtime, like they were able
to do with the advent of computer-based book-entry settlement and
manditory registration of equity positions, doesn't mean that you
have an obligation to control it.


If somebody took an axe to all government "regulation" of the
economy, particularly from about the passage of the 16th amendment --
about 1916 or so -- we would be enormously better off.

Not that it'll ever happen of course, but I feel like venting this
morning...

Cheers,
RAH
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<http://online.wsj.com/article_print/0,,SB108318701386996379,00.html>

The Wall Street Journal

      April 29, 2004

 HEARD ON THE STREET


For Icahn, ImClone Purchase
 Was a Good Thing
Investor Faces $250 Million Profit
 From Bet Made as Stewart Sold;
 Time to Take the Money and Run?

By SUSAN PULLIAM
Staff Reporter of THE WALL STREET JOURNAL
April 29, 2004; Page C1


Talk about zigging when others zagged.

By now, everyone knows how Martha Stewart was alerted by a Merrill
Lynch & Co. brokerage assistant that Sam Waksal, her friend and
founder of ImClone Systems, was trying to sell the biotech company's
shares.

Less well known, however, is the story of how financier Carl Icahn
was buying ImClone shares that very day, possibly even snapping up
the same shares that Ms. Stewart was unloading.

Mr. Icahn recently disclosed in a filing with the Securities and
Exchange Commission that he owns 5.24 million shares of ImClone, a
stake he first began accumulating with a purchase of 10,000 shares on
Dec. 27, 2001, people close to the situation say.

After his purchase on Dec. 27, Mr. Icahn stopped buying ImClone for a
few months. As the scandal unfolded and the share price fell to below
$10 in the summer of 2002, Mr. Icahn began buying ImClone shares
again, adding 3.6 million shares to his holdings. He bought the stock
again earlier this year, picking up 1.63 million shares. That
purchase brought his average purchase price to $19.58, according to
the SEC filing.

His profit, with ImClone shares now at $70 each, the level where they
were before the scandal hit would be a cool $250 million.

So much for the value of a tip from a broker. Ms. Stewart was
recently convicted on criminal charges of lying to prosecutors about
the facts surrounding her sale of ImClone stock, which she sold at
about $58. Her lawyers have asked for a new trial on the grounds that
one of the jurors lied on his courtroom questionnaire. Mr. Waksal,
meanwhile, is serving a seven-year jail sentence after pleading
guilty to insider-trading charges.

But Mr. Icahn, who is famous for his contrarian bets, went the
opposite direction of the ImClone inner circle, believing that the
drop in the stock represented a chance to pick up a bargain, say
people close to the situation.

Mark Weitzen, Mr. Icahn's lawyer, declined to comment.

BUYING OPPORTUNITY While Martha Stewart was unloading her ImClone
shares, Carl Icahn starting to build up his stake. See how ImClone's
stock0 has performed since 2001.

ImClone shares began falling in December 2001, from $75 on Dec. 6 to
$46.46 on Dec. 28, when ImClone announced that the Food and Drug
Administration had refused to review its application to market
Erbitux, ImClone's promising new cancer drug. The stock continued to
plunge to a low of around $6 in the summer of 2002, after news
surfaced that Mr. Waksal had tipped off his family about the
development, triggering an investigation. Around the same time,
prosecutors launched an investigation of Ms. Stewart's sale of
ImClone stock.

It turns out Mr. Icahn's instincts were right. This February, the FDA
finally approved Erbitux for use against colon cancer.

On Tuesday, ImClone reported a big jump in earnings on the strength
of Erbitux and a licensing payment by Bristol-Myers Squibb Co.
connected to the approval of the drug. Earnings for the New York
biotechnology company totaled $62.7 million, compared with a loss of
$34.8 million a year earlier.

In 4 p.m. trading yesterday on the Nasdaq Stock Market, ImClone
shares fell 63 cents to $69.31.

The question now is how long Mr. Icahn will hang on to his ImClone
shares. If history is any guide, he could be thinking of taking some
money off the table.

That is because Mr. Icahn's latest gain in ImClone stock follows a
nearly identical profit of $250 million on an investment in ImClone
in December 2000, when Mr. Icahn disclosed in an SEC filing that a
group, including himself, owned more than six million shares of
ImClone.

Mr. Icahn's group sold those shares in mid-2001 at around $70 each.
That was a few months before Bristol-Myers bought a big stake in
ImClone.

Mr. Icahn's sale back then preceded a big drop in ImClone's shares to
below $40.

People close to the situation say the financier joked at the time
with Mr. Waksal that he was selling the shares because it was his
rule of thumb to sell when an investment gain totals "a quarter of a
billion dollars." It isn't clear whether Mr. Icahn applies that rule
the second time around.


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-- 
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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'