ETF Insider Trading: It’s BHH

February 11, 2011


BHH Trading Over 1 Year


Source: Bloomberg


The giant upswing in volume was driven by Ariba’s earnings call on Jan. 30, where earnings topped analysts' expectations and its stock jumped 9 percent.

The real noise started after the 8K filing after market on Jan. 27, as you might expect. But the big share accumulations in December beg the quetion: Why BHH?

BHH Shares Outstanding

BHH Shares Outstanding

Source: Bloomberg

Gee. Why would anyone go and buy 600,000 shares of BHH for a dollar a share and pay 20 times the per-share commission, when they could have just bought Ariba? And why would someone want diluted exposure to Ariba?

I mean, does anyone really want 9 percent of ICGE so badly that the HOLDRs package of convenience made up for the huge difference in handle?

Hardly. It seems inconceivable to me that the 600,ooo in volume, and previous high-volume days in the month or two prior to the Ariba surprise, weren’t the function of someone with an inside-peek and a (clearly misguided) belief that nobody would notice if they just loaded up in the HOLDR, instead of the stock itself. Because a quick look at BHH shares outstanding will show you that yes, Virginia, someone’s been loading up.

The beauty of the scam, at least from the point of view of the scammer, is that there’s almost no need to unload the ICGE exposure. At just 9 percent dilution and a very high correlation to Ariba, why even bother shorting it out?

Is it likely this is a widespread practice? Nah. It’s just too hard a game to play once you add a few dozen securities to the portfolio. But for the thinnest of the thin HOLDRs, it’s definitely playable.

It’s good to know these icons of a bygone era get to live on, even if it’s in infamy.



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