The Autorité des marchés financiers (AMF) announced that Baazov, two other individuals and three companies were facing a total of 23 charges and the respondents are “alleged in particular to have used, between December 2013 and June 2014, privileged information pertaining to the securities of Amaya inc. for trading purposes. As well, a few of the respondents are alleged to have conspired to commit some of the offences.” June 2014 was the month where it was announced Amaya had agreed to acquire Oldford Group, owner of Rational Group and ultimately the PokerStars and Full Tilt brands, for $4.9bn.
Baazov is specifically facing five charges, “in particular for aiding with trades while in possession of privileged information, influencing or attempting to influence the market price of the securities of Amaya inc., and communicating privileged information”. It was confirmed earlier today (Tuesday) that Baazov would step down from his duties as CEO and chairman as he plans to acquire the company and to deter Amaya from being distracted while he faces the charges, which he denies.
The AMF has also announced that it has executed search warrants and obtained freeze and cease trade orders to a group of 13 individuals and among them is Josh Baazov, David’s brother. The individuals have been accused of leaking privileged information about potential mergers and acquisitions involving Amaya in particular.
We decided to take a look at the alterations to Amaya’s Toronto Stock Exchange (TSX) share price around that December 2013 to June 2014 period and what this could potentially indicate.
What happened?
The AMF did not specify which particular days within December 2013 and June 2014 that the privileged information is alleged to have been used for trading purposes, so we looked at the changes to the share price on the TSX from Monday 2 December 2013 to Monday 30 June 2014, though it should be noted that the deal to buy Oldford Group was announced as agreed on 12 June.
Amaya now also trades on the NASDAQ Stock Market, but only as of June 2015.
The TSX share price was CAD$7.95 on Monday 2 December 2013 and little of note seemed to occur in that month, with the share price peaking at CAD$8.01 on 27 December and reaching a low-point of CAD$7.52 on 12 December.
The trend for the first two months of 2014 was one of a steady climb, as despite a dip to CAD$7.27 occurring on 16 January, no clear decline came until March.
March’s timeline shows that from a price of CAD$8.99 on 4 March, the price had descended to CAD$7.45 by the end of the month.
Then came April, and it was in this month that the Amaya share price reached its lowest point in around a year when it fell to CAD$5.81 on 16 April, before making a slight recovery.
May was when things started to get interesting, as having started the month at CAD$6.95, the share price increased to CAD$7.29 on 14 May, before a 41% rise to CAD$10.25 on 23 May. Prior to that month, Amaya’s highest ever share price since going public on the TSX in 2010 had been CAD$8.39 in October 2013.
Rumours were now abounding, with reports of a potential deal that could involve Amaya purchasing PokerStars being published at the back-end of the month.
In that month, the only significant news to have officially come from Amaya was its first quarter 2014 financial results and that its Cadillac Jack subsidiary had received approval to utilise a slot machine platform in New Jersey.
Some of the figures in that Q1 report were positive, with revenues increasing slightly year-on-year to CAD$41.2m and net income of CAD$39.6m was reported, in comparison with a net loss of CAD$7.4m a year earlier.
Those financials were published on 15 May and the share price increased CAD$0.33 to CAD$7.62 at the end of that day.
Amaya made a statement on 26 May, and was not quashing the speculation when it said: “In response to trading activity that may stem from market rumours that have come to the company’s attention regarding a potential strategic acquisition, Amaya Gaming Group Inc. (TSX: AYA) stated today that strategic acquisitions have been and are one component of the company’s growth strategy and, as such, Amaya regularly evaluates potential acquisition opportunities.”
By the time the Oldford Group agreement was announced on 12 June, the share price had risen to CAD$12.02 at the end of the previous day’s trading. This then increased to CAD$23.11 by the end of the month and was CAD$28.65 when the deal was announced as completed on 1 August 2014, almost four times its value five months previously.
What does all this indicate?
Should there be truth in the AMF’s allegations, the share graph would perhaps indicate that knowledge of the Oldford Group deal had only had a severe effect on trading operations, in terms of the share price, from May, so it leaves some intrigue as to what was going on in the months prior to that share price hike that would have been affecting trading operations.
Having said that, the AMF did not single out the Oldford Group deal or what particular types of trading purposes had been affected, so we can only speculate.
Had an investor purchased shares in Amaya at that April low-point of CAD$5.81 and sold those same shares even at the end of the day before the announcement of the Oldford Group acquisition agreement, they would have enjoyed a 107% profit on their investment.
Other factors
One thing that should be stressed is that the share price could have been affected by more than just potential insider trading. Amaya’s website provides a chronology of events that could have had an impact on its share price. As well as the financial report, one article in the Globe and Mail on 24 April suggested that Amaya seemed a more attractive proposition than it had been previously, with its business being driven by land-based operations. Amaya also references that from 16-20 May, multiple analyst reports stated that Amaya was working on a large and transformative acquisition.
At the time of writing, Amaya’s TSX share price stands at CAD$15.90, up from CAD$14.73 when the AMF made its announcements last Wednesday.
