Outsider Trading – Bloomberg

One possibility here is that he was deeply informed about the auction, he had nonpublic information that made him think that Nationstar would win, and he bought Nationstar stock to bet on it going up. Another possibility is, look, there was an auction, somebody was going to win, and it would be good for him if his company won and bad for him if another company won. He did his best to win, but he bought shares in the other company to cushion the blow in case he lost. If Ocwen had won this auction, presumably he’d have a loss on his Nationstar shares, but he’d have a gain on his Ocwen shares and his career generally; this $157,000 gain was the consolation prize.

It feels vaguely like bad corporate governance for an executive of one company to diversify by owning his competitors? You want him to be fully motivated to win. 5 And yet I do not think it is insider trading exactly, and I sympathize. If I were a CEO, I’d be tempted by this. If some other company is better at your job than you are, why not own their stock?

Source: Outsider Trading – Bloomberg