SEC Investigating Apple Trading

Have some investors been screwing around illegally with the shares of high-flying Apple, Inc., a superstar of the investment scene?
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Hey, have some investors been screwing around illegally with the shares of high-flying Apple, Inc., a superstar of the investment scene?

Apparently, the Securities & Exchange Commission is suspicious this may be the case and has kicked off an investigation into the trading in Apple's securities both here and abroad. This is revealed in a series of documents it recently fired off to the brokerage community.

I have obtained copies of those internal SEC documents from a regulatory contact. Interestingly, the nature of its interest shows that the commission is not investigating, as is usually the case, the trading that occurred in a specific time period, but rather, in this instance, in four specific time periods. This suggests the SEC could be looking into more than one potential violation in the trading in Apple shares.

What the agency is seeking in its queries to the brokerage community are the names of its clients who specifically bought and sold Apple's securities in those four time periods and whether anyone did so with a knowledge of non-public, inside information.

What's it all about? The SEC, as usual, declined comment, and Apple refused to respond to calls seeking comment. Wall Street sources, however, speculated that the agency's investigation likely centered on possible trading that may have been based on the illegal use of inside information involving three particular Apple-related developments. In effect, they raise specific questions:

--Whether anyone got an illegal lead on precisely how sales were faring on key items in Apple's highly successful Ipod product line.

--Whether anyone was given a precise insight into the health of the company's co-founder and CEO, Steve Jobs, a cancer survivor who took a six-month leave of absence last January and then received a liver transplant. Subsequent questions about the viability of his health then led to a great deal of volatility in Apple's shares.

--Whether anyone had exact knowledge of when specific releases would be made by the company with regard to Jobs' health or Ipod sales and pretty much of an awareness, as well, as to what those announcements would say.

Judging from "some uncanny trading" that he saw taking place in Apple, one hedge fund trader told me "it almost looked at times like the buyers and sellers were working at the company."

In any event, if you're an Apple shareholder, you are one of those lucky investors since 2009 has been a big winner for you. The stock closed last year at 85.35 and is presently trading at $170.05, meaning it has almost doubled in 8 months in a difficult and erratic market environment. Moreover, the shares are trading just a shade below their 52-week high of $176.25.

A number of Apple trackers are convinced it's still gung-ho ahead for the stock. For example, several see substantially greater capital appreciation, with a number, such as Deutsche Bank and Canaccord Adams, projecting gains that could push up Apple's shares to the $200 to $2.50 level. The stock's all-time high, $202.96, was recorded in 2007.

A word of caution, however, before you dash out and buy some Apple shares. There are also a number of disbelievers out there, as evidenced by a sizable short interest (a bet the stock price will go lower) of 16.3 million shares. This skeptical view is largely based on the belief that the huge rise in the company's shares more than adequately discounts Apple's positive fundamentals.

Meanwhile, speaking of SEC stock trading investigations, the agency, based on additional copies I've obtained of documents it recently sent to brokerage firms, is also looking into the buying and selling action in Biogen Idec, Human Genome Sciences, BioMS Medical Corp., Blackout Media, Location Based Technologies, Advanced Medical Optics and Hansen Medical.

Write Dan Dorfman at

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