Alan Reynolds of the Cato Institute writes:
The media keep reporting Mrs. Stewart sold ImClone shares the day before that stock began to fall on news that the Food and Drug Administration had failed to approve the company's cancer drug, Erbitux. In reality, ImClone stock had been slipping long before Martha Stewart's sale on the afternoon of Dec. 27, 2001. After all, the FDA had only until the end of the year to decide one way or the other. It didn't take a financial genius to figure out that every passing day of delay looked more ominous. After closing at $70 on Dec. 14, ImClone fell every day. "Sell the rumor" made sense.
On Dec. 27, more than 7.7 million shares of ImClone were sold -- including the trivial 3,928 shares sold by Martha Stewart. ImClone opened at $63.49 that day and closed at $58.30. The reason the stock fell that day was scarcely news, nor an inside secret. At 3:13 that afternoon, Bloomberg News cited a CNBC report from earlier that day regarding ImClone falling sharply "on concern about whether or not the Food and Drug Administration will approve the company's Erbitux cancer drug." A little before 2:00 that afternoon, Martha Stewart finally sold her shares for $58.43 -- about $14 below the December peak. Far from being early, she was a bit late.
I once spoke about this on the Buchanan-Press show, and Bill Press screamed, "She broke the law." Really? What law was that? He thought she had violated some law against insider trading. But Martha Stewart was never an insider at ImClone, nor is she accused of getting information from an insider. Besides, Congress never enacted any law against insider trading. A fine book on the topic by Stephen Bainbridge notes, "The modern prohibition [of insider trading] is a creature of SEC administrative actions and judicial opinions."
Heh. Go read the whole thing.
