Monday, January 18, 2010

Pinera's Not Quite Insider Trading and he's Still a Billionaire

Pinera, who was a senator for eight years and ran unsuccessfully for president in 2005, ranked 701st among the world's billionaires in March with a net worth of $1 billion.. Yes, he still seems to be worth the same $1 billion for the past 5 or so years I've been able to track. Oddly, that doesn't square well with the fact that his LAN shares are worth around $1.5 billion. And with common sense finance that tells us our money doubles every 7 years or so("The easiest way to think of it is with the rule of sevens," said Jonathan Berk, assistant professor of finance at the Haas School of Business at the University of California at Berkeley. "If you put $100 into an account and compound it, it doubles every seven years." ) with simple interest compounding. So, how much is Pinera worth?It's obviously a well kept secret-Forbes has no idea either. I think they must call and ask "so, what can we put you down for this year Sebastian?" Research would be difficult and include adding up his stakes in television network Chilevision and his reported 13% of soccer club Colo-Colo.

Not to mention, it's still difficult because I'm sure he has become as clever at creating holding and shell companies as any wealthy American. But here's one. And from a 1999 article, I saw this "Through his investment holding Inversiones Bancard, Chilean businessman Sebastian Pinera increased his stake in Entel to 4.7%. Pinera is also expected to unite support from enough partners to be elected to the Entel board." And here's a little more: Chile, May 13, 2002Bancard, the investment company from Sebastian Pinera, has been purchasing shares in the stock market, pursuing a strategy to reinforce positions in the companies where it is already a shareholder. In 2001 Bancard has acquired a 2,79% stake in the electric company Colbun. It has stakes in Lan Chile and Parque Arauco, while it is appointed board members in Pampa Calichera, and Antarchi...

Here's the deal-this is one wealthy guy and his companies all have "stakes" in each other.
It's not only an extremely tangled web of holding companies within companies within companies owning each other, it's in English and Spanish!

So, about insider trading or as Mr. Pinera might put it "it just looks like it but really it's not"-sort of 'looks like a duck, quacks like a duck but no it's not" . On July 24, 2006, Chilean businessman, ex-senator and right-wing presidential candidate Sebastian Piñera bought three million shares of Lan Airlines, the company he partly owns. The following day, Lan released its first semester earnings: profits went up by 6.4 percent. The Superintendent’s Office for Assets and Securities (SVS) found Piñera’s activity suspect, and yesterday charged him with violating a law that would have precluded him from acquiring shares, after the agency concluded its six month investigation.

According to the SVS, the regulatory body charged with overseeing financial transactions in the stock and securities markets, Piñera’s purchase of the shares the day before the company revealed its good news breached Article 165 of a 1981, which prohibits anyone with privileged information from making trades on the basis of it.

Here's the part I love: "For his part, Piñera flatly denies any wrongdoing. He defended the purchase by arguing that it was not inconsistent with market tendencies; that the share price raised because it was known that Piñera had bought more stock; and that the actual date of the transaction was decided by a foreign broker."

So the share price didn't go up because earnings were up(and that is the general consensus in the financial biz-when earnings are way up, so goes the stock but never mind) the stock went up because Pinera bought more stock. All these years and we have had it backwards-just buy what "they" buy. And his other defense was that the stock was bought by a "foreign broker". How interesting but I don't guess we'll ever know where the stock was held. And because he is Chilean, the SEC can't touch him, I'd guess. And their Chilean counterpart has to keep track of holdings here and there. Not even possible.

So, he bought 3 million shares but I can't find how much he made. Was it the Chilean stock market or the US market? So I can't research the price he paid or the price history after the earnings report came out. The fine was $680,000 to $700,000 USD depending on the account you read. The fine would be in Chilean pesos(chp) so you have the currency exchange rate to contend with.

And how are international companies and their holding companies dealt with at all? I think abolishing holding companies would be a start so we can see who owns what-for real.

Note: I see when I published. I somehow lost all my links-and there are many! I will work to get them back on.


Kyle Hepp said...

And really, what is going to do now...sell all his LAN shares to his brother under some kind of agreement that after the term his brother sells them back at the same price? Wouldn't doubt it.

Laura said...

The LAN shares-trading on the Friday before his election were hot and heavy and i have seen speculation that Pinera dumped some shares already. Impossible to know with unregulated institutional markets these days. Another rumor is that will simply put them in a "blind" trust(I'm sure he will forget they are there). Still another source says he will sell to the Cueto family who he has a long relationship with-As a matter of fact he bought many of his shares from LAN Director Cueto who was also charged and fined for a similar "not really insider trading" incident/transaction occurring at the same time as Pinera/