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Draw a Distinction Between Raiders and Insider Traders

April 12, 1987

I object to John F. Lawrence's tactics in his March 15 column, "Let's Outlaw Abuses Behind Takeover Bids." He unjustifiably tries to forge an absolute link between corporate raiders and insider traders. Lawrence also suggests that some legitimate practices are forms of stock market manipulation.

We were first exposed to Lawrence's ultimate concern where he writes: "The scandal (insider trading), however, only serves to confirm what some people have been warning all along--that the corporate raiding game often involves stock market manipulation." However, Lawrence cannot logically conclude that legislation is needed to restrict hostile takeovers.

Insider trading profits can be made as a result of any significant corporate decision, including friendly takeovers as well as unfriendly ones. Insider trading is wrong at any time, whether or not the inside information relates to an unfriendly acquisition, and therefore we should do all we can to stop insider trading, but not hostile takeovers. Lawrence also tells us that: "Raiders shouldn't be permitted to invest first and disclose later."

Lawrence seems to be arguing that this is bad because "recent history shows us that the profits have been enormous." So what? Does Lawrence think making money is wrong? Should one have to tell the world every time an investment is made in an undervalued situation? Lawrence does believe that tough regulations "would force so much public disclosure that insider traders would find far less on which to profit."

Lawrence, in a very clever way, again attempts to mislead the reader into thinking that raiders are the same as insider traders. They are not! Finally, Lawrence tells us that "no one should be permitted to buy a publicly owned company without having to pay for it."

I do agree with Lawrence's final point and I can't remember the last time someone did buy a publicly owned company without paying for it. Lawrence has certainly not proved that raiders manipulate the stock market. Profiting because one recognizes value in companies where current management is not earning an acceptable rate of return on its assets is good and benefits everyone except the wasteful management.



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