||"A historical political resource."
[Steve] Westly's history of questionable IPO stock trades
|Last Edited||Patrick Feb 21, 2006 02:45am|
|Media||Newspaper - San Francisco Chronicle|
|News Date||Sunday, February 19, 2006 08:00:00 AM UTC0:0|
|Description||State Controller Steve Westly made a $286,000 profit at the height of the dot-com boom through a pattern of stock trades that experts say is consistent with participation in a banned stock-market manipulation scheme. |
His tax returns show that on 33 occasions between April and October 1999, Westly -- then an executive at the online auction house eBay and today a Democratic candidate for governor -- bought blocks of hot new dot-com stocks at the initial public offering price, a lucrative investment opportunity that underwriters steered to wealthy clients and other insiders.
Then, after the market opened and public trading began, Westly bought more of the same stocks -- almost always an identical number of shares. He paid premium prices, sometimes as much as triple what he paid for the IPO.
A Westly spokesman said Westly did nothing improper, but several experts consulted by The Chronicle said Westly's pattern of stock trading suggested "laddering," a scheme in which investment banks pump up the price of a new stock by requiring IPO purchasers to buy more of the stock after it opens for trading.
The insiders' post-IPO purchases drive up the price, creating the illusion that the stock is in heavy demand. Ordinary investors, unaware of what is happening, often lose heavily after insiders start to sell and the stock price drops.
In all 33 cases, Westly sold the stocks soon after buying them, his tax returns show. He lost more than $71,000 on the shares he bought after the stocks were made available to the public.
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