Legal Question in Business Law in Colorado

Insider Trading

My company was purchased by another company a few years ago. We are a subsidary of this company. The company that purchased us is doing very bad financially. The company just offered the employees at their facility a deal to exchange the stock options that they were granted at an earlier time, for stocks at a much lesser cost (practically free). They will not offer this to the employees at the facility I am at. Is this illegal , especially if they know that the business might go belly up? I am wondering if the upper management is doing this to benefit them alone, because it looks like they may go out of business.

Asked on 9/19/01, 6:23 pm

1 Answer from Attorneys

Louise Aron Attorney at Law

Stock in an insolvent company

Louise Aron

Attorney at Law

Lakewood Office:

1536 South Ingalls

Lakewood, Colorado 80232 USA

(303) 922 7687

fax (303) 922-1370

Cherry Creek Office:

300 South Jackson #100

Denver, Colorado 80209 USA

(303) 780-7339

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LawGuru User

Dear LawGuru User:

I regret that I do not have enough information to answer your question or to evaluate whether or not insider trading is occurring. However, insider trading usually means an inordinate profit was realized by one or more people with access to financial and business information which is not otherwise available. The options or sales you have described granting or selling stock in a nearly insolvent company do not seem to be driven by profitability.

Any manager, employee or other person who purchases or is given stock in an insolvent company owns worthless stock. I do not understand why a person who is not offered the opportunity to own worthless stock, whether by gift, sale or option, would be disappointed.

Please feel free to contact my office for additional information. Thank you for using LawGuru.


Louise Aron

Attorney at Law

My web site

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Answered on 11/06/01, 6:40 pm

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