This is not the SEC probe Bill Ackman was hoping for

August 14, 2014
August 14, 2014

It hasn’t been a great few weeks for hedge fund billionaire investor Bill Ackman.

First, an attempt to deliver “deathblow” to  shares of nutritional-supplement company Herbalife Ltd.—he has bet against the stock and accused the company of being a pyramid scheme—resulted in the shares soaring more than 25%.

Now the Wall Street Journal is reporting that the Securities and Exchange Commission is sniffing around to see whether Ackman’s hedge fund, Pershing Square Capital Management, and Valeant Pharmaceuticals International may have violated insider trading laws with their $53 billion hostile takeover bid for Allergan, the maker of Botox.

Ackman bought up 9.7% of Allergan’s shares in February, reportedly in concert with Valeant, which announced its takeover bid in April. The tag-team approach was unusual, but legal experts told the Journal that the alliance doesn’t appear to run afoul of SEC regulations. The article also notes that the early-stage probe into Ackman’s and Valeant’s joint tender offer (paywall) may not lead to any penalty by the financial regulator.

Here’s what a spokesperson for Ackman’s hedge fund Pershing Square Capital told the Journal:

“There is nothing illegal, unethical or improper in taking a toehold position before a merger is proposed, even if it is not wanted by the target’s management. We welcome the SEC’s review of the facts.

Allergen filed a lawsuit against Ackman, Pershing Square, and Valeant on Aug. 1, alleging insider trading violations and a failure to disclose legally required information.

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