Insider Trading Jf July 1992

Section I reviews the history of Anheuser-Busch’s acquisition of Campbell Taggart, explains how the inside information was generated and transmitted, and describes the insider trading data. Section II discusses some empirical implications of models of informed trading. Section III presents the empirical results, including a trade-by-trade analysis of the behavior of Campbell Taggart’s stock price in response to the insider trading. The final section discusses the implications of the findings and. summarizes our conclusions. I. The Acquisition of Campbell Taggart by Anheuser-Busch A. Acquisition History The history of Anheuser—Busch’s acquisition of Campbell Taggart is drawn from publicly available documents filed in the case of Anheuser-Busch Companies v. A. G. Edwards et al. (United States District Court (1988)) and in the case of the SEC v. Paul Thayer et a1. (United States District Court (1984)). The SEC case was settled When Thayer consented to pay the US. Treasury Department $550,000, an amount based on the trading profits of his friends and tippees. The Anheuser-Busch v. A. G. Edwards case also was settled, but its terms were undisclosed. In late May 1982, Anheuser-Busch’s Policy Committee and its Corporate Planning Department decided to include Campbell Taggart as one of a small number of companies under consideration for acquisition. On June 8, Anheuser-Busch informed its investment banker that it had narrowed the list of possible targets to four firms, including Campbell Taggart. On June 11, Anheuser-Busch retained a law firm specifically to advise it concerning the possible acquisition of Campbell Taggart. Between June 11 and June 22, there were numerous meetings and contacts by telephone among representatives of Anheuser-Busch, its investment banking firm, and its attorneys to discuss the acquisition. On June 23, Paul Thayer, a director of Anheuser-Busch, attended an Anheuser-Busch board of directors meeting in St. Louis, Missouri, at which the possible