Thursday, September 1, 2016

"A Yale professor says Dow Chemical shares show 'pretty clear evidence of manipulation'" (DOW; BRK)

$53.93 up 29 cents.
From MoneyBeat:

Dow Chemical’s 1-in-1000 Stock Action Works in Warren Buffett’s Favor
Dow Chemical shares are showing clear signs of tinkering, according to an analysis by a Yale University professor.

The shares come within cents of an important threshold–$53.72–pretty often. But they’ve closed above that level so rarely that there’s less than a one-in-a-thousand chance that ​it’s happening randomly, according to the analysis.

If the stock closes above $53.72 enough times, Dow has the option to buy back $3 billion worth of preferred shares from Warren Buffett’s Berkshire Hathaway. But as the Journal noted in a front-page story last week, people familiar with the matter say that executives at Dow believe someone is selling its stock short — or betting that its price will fall — to keep it from rising above $53.72.

In his analysis, ​Yair Listokin, who teaches contracts at Yale Law School and is a trained economist, picked 48-cent ranges for the daily closing price of Dow stock from April 1, 2014 to Monday. He plotted every 48-cent increment of the share price during this period against the number of times the shares have closed in that range.

For instance, the shares have closed just below $53.72 more than 50 times. They’ve closed in the ​$52.71 to $53.71 window 91 times. The number of times they’ve closed ​in the window just above $53.72? ​Seven times.​

This week, the shares closed at $54.13 on Monday and $53.99 on Tuesday after the Journal story was published.

Mr. Listokin’s histogram shows the dramatic dropoff​.​ Even accounting for different methods, Mr. Listokin said the chance of this being a random occurrence is remote....MORE
HT: Value Investing World