Global Education & Technology Group Down 12% on Absaroka Capital Report
A research report was released by Absaroka Capital in the last hour which has caused significant volatility in shares of Global Education & Technology Group (NASDAQ: GEDU). The stock is currently trading down 12%, and is very volatile and attracting heavy volume. The report suggests that a recent SEC criminal complaint implicating GEDU's management in an insider trading syndicate related to the acquisition of the company by Pearson PLC (NYSE: PSO) may cause the deal to fall through.
On November 21, 2011 Pearson agreed to acquire GEDU for $294 million, or $11.006 per share. This amounted to a 105% premium over the previous day's price and a whopping 214% premium over the 30-day average price of GEDU shares prior to the acquisition announcement. In the days and weeks leading up to the announcement of the deal, suspicious trading activities were taking place in GEDU shares in brokerage accounts linked to the company's management.
Absaroka Capital states in their report that the investigation into illegal insider trading surrounding the announcement of the acquisition may lead Pearson's (PSO) board of directors to reconsider the price of the transaction or the entire acquisition. As such, a short position in GEDU shares may be providing a good risk/reward opportunity according to the report because the market has not been properly pricing in the potential implications of the SEC criminal complaint and management's alleged involvement in insider trading.
The report is sure to continue to ruffle feathers for a few days to come. "Moreover," the report states, "because the brokerage orders for All Know Holdings Ltd. Ms. Chen Sha and Mr. Yao Zhi all originated from the same computer, it appears highly likely these accounts are held in "straw-man" names for a yet-to-be publicly determined benefactor."
Following the release of the report, GEDU shares spiked over 13% lower.
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