U.S. Securities and Exchange Commission
Litigation Release No. 21766 / December 8, 2010
Securities and Exchange Commission v. One or More Unknown Purchasers of Securities of Wimm-Bill-Dann Foods OJSC, 10 Civ. 9159 (JFK) (S.D.N.Y.) (filed Dec. 8, 2010)
Court Freezes Assets Linked to Suspicious Securities Purchases Ahead of WBD Foods Acquisition Announcement
On December 8, 2010, the U.S. District Court for the Southern District of New York entered a Temporary Restraining Order freezing assets and trading proceeds of certain One of More Unknown Purchasers of the Securities of Wimm-Bill-Dann Foods OJSC (the “Unknown Purchasers”) and prohibiting the Unknown Purchasers from obtaining the securities or the proceeds from any sale of the securities. The Commission filed a complaint alleging that the Unknown Purchasers engaged in illegal insider trading in the last three days before the December 2, 2010, announcement that PepsiCo, Inc. intended to acquire a 66 percent interest in Wimm-Bill-Dann Foods OJSC (“WBD”) for $3.8 billion, pending required government approvals. (The $3.8 billion price for 66 percent implies a total enterprise value of $5.4 billion.) WBD is a Russian corporation that manufactures and sells dairy and fruit juice products. It has American Depositary Receipts (“ADRs”) that trade on the New York Stock Exchange. The Commission’s complaint alleges that the Unknown Purchasers, through their insider trading, violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks permanent injunctive relief, the disgorgement of all illegal profits, and the imposition of civil monetary penalties.
The Commission’s complaint alleges that, in an account maintained at SG Private Banking (Suisse) SA in Geneva, Switzerland, the Unknown Purchasers placed orders to buy 107,500 ADRs on November 29, 2010; another 132,500 ADRs on November 30, 2010; and an additional 160,000 ADRs on December 1, 2010. The Unknown Purchasers’ buys on November 29th comprised 23 percent of the total trading volume of WBD ADRs that day; their purchases on November 30th comprised 13 percent of that day’s total trading volume of WBD ADRs; and their December 1st purchases comprised 21 percent of that day’s total trading volume of WBD ADRs.
The complaint further alleges that, after the acquisition announcement, the price of WBD ADRs rose approximately 28 percent for the day. As a result, the Unknown Purchasers are in a position to realize total profits of approximately $2.7 million from the sale of the ADRs.
The Court's Temporary Restraining Order prohibits the transfer of the illegally purchased WBD ADRs, or proceeds from their sale, to the Unknown Purchasers. In addition, the Order requires the Unknown Purchasers to identify themselves, imposes an expedited discovery schedule, and prohibits the defendants from destroying documents.
See Also: Temporary Restraining Order