Elan Corporation, plc (ADR) (ELN): The Biggest Insider Trade in History

By July, however, though unbeknownst to the rest of the market, it began to appear as if a more in-depth presentation on the results, scheduled for July 29, wouldn’t be as well received. Consequently, following the receipt of the confidential test results as well as multiple conversations with the doctor responsible for making the presentation, Martoma decided to unload the position and instructed Cohen to follow suit. Over the span of five days between July 21-25, SAC sold its entire position for a gross take of more than $500 million and, not satisfied at that, proceeded to go short.

Suffice it to say, come July 29, well, the chart is pretty clear on the rest of the story.

My point here is simple. Many people who call themselves investors are of the opinion that they can outsmart the market by betting on short-term catalysts like earnings announcements or, in this case, the results of a pharmaceutical trial. The problem is that we can’t, or at least, that we’re at an extreme disadvantage in trying to do so. Unlike SAC, most investors don’t have the means to compensate corporate insiders who are willing to share information ahead of time. And unlike SAC, many investors aren’t willing to sacrifice their integrity, not to mention their freedom, to do so anyway.

Does this mean we don’t have a competitive advantage — an “edge,” as the traders at SAC would term it? No. In fact, we have a powerful one. As my colleague Morgan Housel recently discussed, “I’m a long-term investor. … The fact that you and I don’t have to play these insane short-term games is the last remaining edge we have over Wall Street. And frankly, it’s enormous.”

The article The Biggest Insider Trade in History originally appeared on Fool.com and is written by John Maxfield.

John Maxfield has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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