The NY Times business columnist Gretchen Morgenson — who regularly writes with a curious anti-business agenda — weighs in again in the Sunday Times with this frontpage article about trading in anticipation of merger announcements that begins with this proclamation:

“The boom in corporate mergers is creating concern that illicit trading ahead of deal announcements is becoming a systemic problem.”

Morgenson then goes on to report on a recent study that confirms the particularly unsurprising news that trading frequently increases in the stock of companies immediately before public announcements concerning deals involving the companies.
Morgenson’s article is so disingenuous I struggled to know where to start. She doesn’t explain cogently why insider trading is illegal — just that honest investors are victims of the practice — but even her argument in that regard makes little sense. She contends that sellers of stock are injured by insider trading because they could have held their stock until after the merger announcement and received more value, but that argument assumes that the seller would only sell at the higher price generated by the insider trading and not at the lower price that existed before the insider sales. This is strained, to say the least, as sellers generally sell at the market price (whatever it is at the time of the sale) and take the risk that they are selling the bird in the hand instead of the potentially more valuable one in the bush if they were to wait and sell later.
With such basic flaws in Morgenson’s analysis of insider trading, I was shuddering at the thought of how long it would take me to critique Morgenson entire piece. Thus, I was heartened to discover that Larry Ribstein had already done so, in which he concludes with the following observation:

In sum, this page 1 story on one of America’s leading papers is a particularly egregious example of shoddy and slanted reporting by, perhaps, America’s leading practitioner of shoddy and slanted reporting. No doubt Morgenson’s influence will lead to misguided regulatory and legislative activity, which will impose additional costs on American business. Shame on Morgenson, and even more importantly, shame on her editors for failing to see the dangers of mixing news and commentary, for propogating these phony scandals to sell newspapers.