Case 6. 10 – Martha Stewart: Not Such a Good Thing 1. What issues did Martha Stewart, Bacanovic, and Faneuil miss in making their decisions about selling the ImClone stock in their conduct following the sales? Apply the models and make a list of suggested questions they could have asked that might have affected their decisions. I do not feel any of them were thinking about any consequences! Why was this small amount of money so important to them, especially Ms.
Stewart, who was a multi- billionaire at the time? Maybe it was bad press, or embarrassment…who knows? It is bvious that they weren’t concerned at all about repercussions and just went ahead with their scheme that they truly thought they could pull off without getting caught. Well, it so turned out that they did get caught and lost millions because their reputations and stocks in Omnimedia were much more valuable than ImClone! 2. Was selling the shares illegal? If selling the shares was not illegal, was it unethical? Selling shares are not illegal; it’s all part of the stock market. However, when you have advanced knowledge like this case, it is border-line and extremely unethical. She as thinking only of herself and the profits she’d make, and not considering the company and other stockholders at all. I would go as far as calling it heartless and greedy! 3.
What do we learn about long-term consequences from Ms. Stewart’s conduct and case? Having too much money can turn a person evil. Martha was a multi-billionaire, and why she cared about a couple hundred thousand is beyond me. Not only did she serve jail time, lose respect and money, her stock has decreased more than 50% since 2001 when she was convicted. The public now sees that she is not trustworthy, because he admitted to obstruction of justice and making false statements to federal investigators.
4. What advise can you offer someone who has engaged in trading similar to Ms. Stewart’s? Make a list of all the costs of Ms. Stewart’s sale of the stock and compare it with the losses she avoided by selling the day before the public announcement. My advise would be to be smart, ethical and patient.
Owning stocks is a gamble, and much like playing in a casino, you could be up or you could be down. If a company has a stable track-record, or if it looks like it’s struggling are just two of the factors that you need to consider before you sell.Martha sold her ImClone shares for $229,002 @ $58 per share on Dec. 27, 2001. Had she waited until the next day, she would’ve got $189,495 – a loss of only $39,507, however in the grand scheme, that’s not a loss at all. Omnimedia shares were selling at $70 per share prior to her sentence, and now remain between $17-$24 a share.
For every $1 drop in her stock, Martha Stewart loses $30 million! So, to compare her losses, I don’t even know where to begin! She was so concerned with selling to avoid losing the $39,507 – yet now she is losing millions per day. It’s a no-brainer to me, and absolutely crazy thinking about what happened to her!