SAC Capital Advisers, which is headed up by reputable investor and billionaire, Steven A. Cohen, is being investigated for possible insider trading involving shares of Weight Watchers International, Inc. (NYSE:WTW) and InterMune, Inc. (NASDAQ:ITMN). Reuters first reported the investigation regarding the Weight Watchers trades, citing an anonymous source familiar with the investigation, who said Cohen himself could be implicated in the investigation. Bloomberg added InterMune, Inc. (NASDAQ:ITMN) to the report early this morning.
The investigation into the Weight Watchers shares involves trades that took place in 2011, when the hedge fund had significant holdings in the company. At that time SAC Capital held more than 2 million shares of Weight Watchers International, Inc. (NYSE:WTW), and the price of those shares doubled during that time frame.
In the quarter before SAC Capital increased its holdings in Weight Watchers significantly, the hedge fund held less than 80,000 shares. The weight loss company’s stock rose significantly after it forecast full-year earnings over the estimates of analysts. Then, SAC Capital decreased its holdings to less than 80,000 shares at the end of June, right before it dropped significantly in early August, as the company reported higher spending on technology and advertising in the second quarter.
The trades of InterMune, Inc. (NASDAQ:ITMN) that have been called into question, took place in the first quarter of 2010 when SAC Capital purchased almost 2 million shares of the stock, after holding no position in it for the two quarters prior. By the end of the second quarter of 2010, the hedge fund held fewer than 11,000 shares of the stock. Shares of InterMune increased significantly in early March after a favorable drug trial review. However, after regulators rejected the company’s application for a lung treatment, the stock fell.
Neither Cohen himself nor SAC Capital has officially been accused of any wrongdoing in these investigations. SAC Capital told Reuters it was unaware of an investigation involving shares of Weight Watchers International, Inc. (NYSE:WTW). Representatives of Manhattan’s U.S. attorney’s office and Weight Watchers have not commented on the investigation, which is the latest in a series of probes involving SAC Capital.
Late last month, prosecutors charged trader Mathew Martoma, a former portfolio manager at SAC Capital, with insider trading in connection with trades which took place shortly before a negative drug trial was revealed, causing shares of Wyeth, now a subsidiary of Pfizer Inc. (NYSE:PFE) and Elan Corporation, plc (NYSE:ELN) to drop significantly. Martoma is SAC Capital’s seventh employee to face federal charges of insider trading.