A financial services professional has pleaded guilty to insider trading of shares in a clinical-stage biotech. The plea relates to allegations that George Haywood avoided a loss of at least $179,000 by selling shares in Neurotrope after learning the biotech, now known as Synaptogenix, was planning a stock offering.
According to the Department of Justice (DOJ), Haywood spoke to a representative of Neurotrope on the day it put out news of a $2.7 million grant from the National Institutes of Health following the release of data from an Alzheimer’s disease clinical trial. The news caused Neurotrope’s share price to double, but, on the call with a representative of the biotech, Haywood learnt of a stock offering that could dent the gains.
The representative allegedly offered to share nonpublic information to Haywood provided he agreed not to try to make any stock offerings based on the details. Haywood agreed, according to the DOJ, and thereafter learnt that Neurotrope would issue a registered direct offering later that day. The offering was expected to cause Neurotrope’s share price to fall, as is often the case in biotech.
Armed with the private information, Haywood allegedly sold or tried to sell Neurotrope shares worth more than $328,000. The daily closing price of the stock was $1.42, well down on the high of $3.85 it hit in the wake of the earlier update about the grant and Alzheimer’s data. Based on the figures, the DOJ calculated that Haywood avoided a loss of at least $179,000 by moving to sell his Neurotrope stock.
Haywood’s guilty plea means attention now turns to sentencing, which is scheduled for Nov. 9. The investor also faces a civil enforcement proceeding filed by the Securities and Exchange Commission (SEC).
The SEC complaint, which was published earlier this month, adds (PDF) that Neurotrope’s chairman called Haywood to share the private information on the condition that he would not trade on it. The chairman quickly followed up with an email to confirm the oral agreement to maintain the confidentiality of the information. By then, Haywood, an experienced investor who owned 19% of the biotech’s outstanding shares, had allegedly called his stockbroker to order the sale of Neurotrope shares.