Insider trading probe into Vivendi chief Fourtou

17th May 2004, Comments 0 comments

PARIS, May 14 (AFP) - Vivendi Universal's chief executive Jean-Rene Fourtou is the target of an investigation by the AMF French financial markets regulator on suspected insider trading and share price manipulation in connection with a convertible bond Vivendi issued in November 2002, sources said Friday.

PARIS, May 14 (AFP) - Vivendi Universal's chief executive Jean-Rene Fourtou is the target of an investigation by the AMF French financial markets regulator on suspected insider trading and share price manipulation in connection with a convertible bond Vivendi issued in November 2002, sources said Friday.

The probe, which began on December 17, 2002 on "the evolution of Vivendi Universal's share price during the issue of convertible bonds" has led in two directions, said one of the sources, who wished to remain anonymous.

One investigation involves massive share sales in the days ahead of the bond issue, which caused the share price to fall sharply.

The other concerns bond subscriptions by a foundation created by Fourtou.

A sourse close to the matter said Deutsche Bank offered London investors Vivendi shares on November 12, 2002 at EUR 10.70 per share, even though they were trading at the time for more than EUR 13.

Hedge funds immediately bought the shares to sell them on at a profit, causing huge volumes to be traded and prompting the price to plummet to its lowest level of EUR 10.86 per share two days later.

The following day, Vivendi launched a convertible bond issue offering a coupon of 8.25 percent and aiming to raise EUR 1 billion (USD 1.19 billion).

Because the Vivendi share price had fallen sharply before the convertible bond launch, the company suffered a higher cost of financing, since it had to issue a larger number of bonds than expected in order to raise the EUR 1 billion.

As a result, investors had the chance to buy more of the bonds than they would have if the price had been higher, and stood to earn a larger capital gain once the bonds were converted into shares.

One of the biggest private investors in the bond issue was a foundation created by Fourtou, which invested EUR 20.3 million.

The head of minority shareholders association ADAM, Colette Neuville, asked the COB, the predecessor to the AMF, to investigate the possibility of insider trading and share price manipulation at the company.

An investigation was launched, which the AMF reopened in recent weeks, and the regulator questioned Fourtou on April 23.

The investigation is centered on Fourtou and his wife, who created a humanitarian foundation, according to the newspaper Le Monde, which quoted sources close to the couple.

Le Monde said Fourtou advised the foundation in November 2002 to sell all its financial assets in order to subscribe to the convertible bond issue, claiming they were a safe and lucrative investment.

Fourtou's lawyer Herve Pisani said Fourtou told the AMF verbally of the foundation's plans, the newspaper added.

The foundation bought 1.16 million of the convertible bonds, and Fourtou's children also bought another 400,000 bonds, for EUR 12.7 each.

Le Monde said Fourtou and his family have legal ownership of the bonds, even though they were bought via the foundation.

© AFP

Subject: French news

0 Comments To This Article