Question

What is insider trading? How is insider trading involved in the ImClone case? What was the insider information and how would ImClone stock be affected by its release to the public?

Answer 1

Soln. Inside trading is the process of accessing inside/non-public information about the company and then doing trading of company's stock or other securities. Some times, individual illegally access the inside information of the company and share it on exchange of other benefits.

In 2001, Martha Stewart, the employee of biotech company, ImClone, sold all her shares and just after two days of her action, ImClone's stock fell by 16%, once it was announced that the FDA had not approved ImClone's primary product, Erbitux. It was believed that Martha had internally got the information illegally and sold her shares without being going in loss. It saves her approx $45,673 amount of money.