Business case no.3

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Martha Stewart was a multimillionaire and CEO of Martha Stewart Omni media. In 2002 she made an insider trade and held 3928 shares of stock in ImClone which was working on an anticancer drug called Erbitux. ImClone company learned in late December,2001 that food and drug administration had rejected the Exbitux drug then Martha Stewart sold her shares for $ 227824 at $ 58 a share. Then the news became public and the share of ImClone plummeted and became $ 48. In this case Martha Stewart had avoided losses at $ 47136. On the other hand the CEO of ImClone Samuel Waksel was arrested on June 12, 2002 on the charges that he advised members of his family to sell $ 9 million of their shares and attempted to sell his own shares at the same day as Martha Stewart did. After that he pleaded guilty to the charges of inside trading. On June 4, 2003 Martha Stewart resigned from her job and from board of directors and she suffered from the publicity of media. On the other hand public opinion was divided whether she was guilty or whether she was charged because she was a famous and successful woman.


The solution:

  1. Martha Stewart was justified in her actions because she had avoided losses of $ 47136.

  2. She was guilty because important information has been concealed on an official investigation.



The important information in inside trade is reveled only for who has the privilege to know something like that and that means whoever uses this kind of information to notice anyone to avoid losses don't deserve his/her position.


Written by Mohammed Hussein

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