|Man Without Qualities|
Thursday, August 22, 2002
The evidence of ImClone insider trading against Martha Stewart remains rather thin, in the view of the Man Without Qualities. But evidence of truly terrible judgment on her part is increasingly plentiful. Now there is a suit filed against her by a shareholder in her own company - Martha Stewart Living Omnimedia - alleging that she dumped shares of her own company right after selling her ImClone shares. The theory of the new suit is that Ms. Stewart knew that her ImClone stock sale - even if it was legal and not based on insider information - was so inherently suspicious that it was bound to attract attention and throttle the stock price of Martha Stewart Living Omnimedia. The public, of course, did not know the facts about her ImClone stock sale. Therefore, the new complaint alleges, Ms. Stewart's sale of Martha Stewart Living Omnimedia stock was itself based on insider information.
A separate class action complaint filed by Milberg, Weiss (a law firm strongly identified with the Democratic Party) alleges:
Stewart, along with the other defendants, sold a total of $79 million in MSLO common stock, with many defendants selling nearly all of their MSLO common stock. As alleged in the complaint, the public first learned of Stewart's complicity in the high-profile ImClone scandal on June 6, 2002, with the publication of a media report --setting-off a precipitous decline in MSLO's stock price. The impact of Stewart's involvement in the ImClone scandal on MSLO's business was, according to the complaint, not known to the public until July 24, 2002, when the Company announced that the circumstances were negatively impacting its revenues and earnings, causing MSLO to slash earnings estimates for the third quarter of 2002 by half and reducing guidance for the entire-year 2002. On July 24, the price of MSLO common stock dropped to below $7.50 per share -- a 60% drop in one month.
A one-year chart of the MSLO stock price helps to bring home just how odd Ms. Stewart's timing was.
It's hard to argue with the allegations in these complaints. If any evidence can be found that Ms. Stewart understood that her ImClone trades would tank her MSLO stock before she sold it, these new allegations could make Ms. Stewart's direct ImClone trouble look positively pastel.
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