Daniel Birnbaum, who built SodaStream into a $3 billion company as CEO of the maker of carbonated-drink devices before it was bought by PepsiCo last year, is being investigated for alleged insider trading, fraud and breach of trust.
The Israel Securities Authority (ISA) said the allegations involved leaking information about the PepsiCo deal as well as at least two other instances to an unnamed former SodaStream employee. Birnbaum was detained on Monday and released a day later on 1.2 million shekels ($340,000) bail.
A court gag order on his name was lifted on Tuesday, but the name of the former employees who allegedly benefitted from the insider information is being banned for publication until after the Jewish New Year holiday next week.
The ISA said the former SodaStream employee is being probed for alleged insider trading and obstruction of justice.
Birnbaum is regarded of one of Israel's leading executives after he took Sodastream from a struggling company worth just $6 million to a global fizzy drink player that challenged Coca Cola and Pepsi in Super Bowl ads that featured actress Scarlett Johansson.
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Along the way, he also fended off charges by activists that the company’s main plant in the West Bank industrial zone Mishor Adumim exploited Palestinians. Birnbaum oversaw the move of the facility to Israel’s Negev region and capped his career with the $3.2 billion sale of the company to PepsiCo in August 2018.
ISA investigators contend that Birnbaum leaked news of the impending PepsiCo sale before it was formally announced in August last year. The U.S. soft drink giant agreed to pay $144 a share for SodaStream, which was listed in New York and in Tel Aviv, a 32% premium on its average stock prices in the 30 days before the announcement.
ISA investigators allege that the former employee bought hundreds of thousands of shekels in SodaStream stock on the basis of Birnbaum’s information and earned 156,000 shekels by selling after news of the deal broke.
SodaStream, where Birnbaum now serves as chairman, said in a statement it was cooperating as needed with investigators. It declined further comment. If Birnbaum is convicted he could face up to five years in prison.
In addition, the ISA alleges that Birnbaum gave the ex-employee, with whom he had a personal relationship, advance information on SodaStream’s record second-quarter 2018 financial results. After it was officially released, the financial report lifted SodaStream shares 23% as the company posted a 30% increase in revenues and an 82% jump in net profit.
The ex-employee also got insider information on SodaStream’s 2016 financial results published before they were published in February 2017. In that instance, the ex-employee earned a 28,000-shekel profit on SodaStream stock, the ISA alleges.
The investigation is the 10th involving insider trading launched in the past year by the ISA. The cases are often difficult to prove and often make use of business intelligence -- technology and the algorithms used to collect, analyze and process big data, in this case to uncover and detect patterns of suspicious activity in stock trading.
Former ISA officials say that all its investigations nowadays are based on BI data without collecting testimony from witnesses or suspects.
In addition to bail, Tel Aviv District Court Judge Keren Gil has barred Birnbaum from leaving the country for 180 days or contacting anyone involved in the investigation for 90 days. The former employee was released on 450,000 shekels bail.