ABSTRACT
An example of when such trading may occur is in the context of a corporate takeover. A company is usually the target of a takeover bid if a bidder considers that the target’s shares are currently undervalued. Prior to the bidder’s disclosure to the market of its intentions to make a bid for the target, an insider with knowledge of the proposed takeover bid might purchase shares in the target. Once the takeover bid becomes public knowledge, it is expected that the value of the target’s shares will increase as the market readjusts to account for the perceived undervaluation of these shares. is ultimately means that our insider is able to capitalize on the increase in share value by selling the shares acquired at the higher price.
