Who knew? Week before its sale Polar Investments stock shot up 17%
Group shares had habit of rising sharply following announcements, indicating problems in trade
By Hagai AmitA week before the controlling interest in Polar Investments (TASE: PLR) changed hands, its share price shot up by 17%.
In early December 2006, Polar's controlling shareholders - Itschak Shrem, Yair Fudim and Avigdor Kelner convened a press conference. They jubilantly announced an agreement selling 41% of the company's shares to Jewish-Canadian billionaire Ziel Feldman, for NIS 207 million.
Smiles all around: Shrem, Fudim and Kelner were presumably happy that they'd managed to exit their floundering company without getting burned. Burned? They got a 35% premium over Polar's market cap on the Tel Aviv Stock Exchange at the time.
Yet they got to keep a minority stake in the company, which now boasted a new growth driver in the form of Feldman, a real estate expert. Given the madness gripping the real estate market, they could be quite confident that they could sit back and watch Polar's share price grow.
As the press conference ended, at around 11 or 12, the audience started to disperse. Kelner stayed behind to nibble at the snacks on the tables. "Come on, let's go to work," said somebody. Kelner laughed. "That's it, I'm done for the day. I'm going home to rest," he said.
No question about it, the trio of financiers at Shrem, Fudim, Kelner (TASE: SFK) knew all about leisure, while making sure to take home top dollar.
But perhaps Kelner felt dissatisfied, and it was just his bad luck that the police were already hot on the trail of one Kobi Ben-Gur. A month later Ben-Gur was behind bars, arrested on suspicions of involvement in the Tax Authority corruption scandal.
Personal gain
At this stage, Kelner is only suspected of abusing insider information for personal gain, with the help of Kobi Ben-Gur. Specifically, the police's suspicions touch on four specific companies belonging to the Polar group: Polar Investments itself, Polar International Real Estate, Polar Communications, and Telit (which is traded in London). How did their shares behave ahead of important announcements?
Indeed, a glance shows that from time to time, either somebody was blessed with the gift of prophecy, or there was something wrong going on.
The clearest case is that of Polar Investments. In the five days before the announcement of the Feldman takeover, its share price rose 17%. That's remarkable, considering that beforehand, its share price had dropped 5% in the preceding 12 months.
Polar Investments stock
A week before the press conference, on Thursday, November 29, 2006, shares in Polar International Real Estate rose 2%, and then on Sunday that company announced that Gmul had appraised it at NIS 235 million. That was three times its market cap at the time. If you add the Thursday gain to the Sunday surge, the share price rose 40%. Inside two months it gained 160%. This is a harder case to attribute to insider information, though.
Five months later, on May 23, shares in Polar International Real Estate rose 5%. On May 24, the company reported settling in respect to the Herald Towers, which would earn it a capital gain of $10 million. Its shares rose another 5%.
The case of Polar Investments changing hands is glaring, but the other alleged cases of insider trading are less so. There are oddities, too, such as the mighty surges in Telit shares. Note that in both the following cases, the leaps in share price followed the announcements: they did not predate the news. The only speculation might be whether people in the know purchased some shares beforehand to benefit from the jump.
Between March 14 to March 16, shares of Telit rose 40% after the company announced a stock allocation to an investor which would be placing 16 million euros into the company. A month later the stock went on to rise another 20%, on April 16, the day the company announced that its controlling interest had been sold to CEO Oozy Cats and to Italian partners.
Kelner, Ben-Gur suspected of insider trading in Polar shares
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