Following an ongoing investigation by the Canadian regulatory agency for financial transactions, an agency in the United States has also launched an investigation into Amaya Gaming and its purchase of PokerStars in 2014.
According to reports from Canada’s The Globe and Mail, the Financial Industry Regulatory Authority (FINRA) is looking into approximately 300 investors who profited heavily off Amaya Gaming’s purchase of PokerStars. At the end of 2014, FINRA sent a request to Amaya for information about individuals who bought up sizeable amounts of Amaya stock prior to the announcement of the PokerStars deal, looking to see if there were any instances of insider trading that might have taken place.
The investigation isn’t being led by the US Government, however. FINRA is a watchdog group that was created by the financial industry as a method of self-regulation outside of the Federal Government’s regulatory agencies. It is the largest independent regulator for all securities firms doing business in the US, monitoring the companies that make up several of the top commodity exchanges, including the New York Stock Exchange and NASDAQ.
In examining Amaya Gaming, FINRA has some interesting evidence to look at from before the PokerStars acquisition. Amaya stated during the reporting of its first quarter 2014 earnings that a “significant acquisition” was on the horizon.
From the timing of that announcement on May 15, the stock price of Amaya doubled over the next two weeks as speculation over Amaya’s acquisition gained steam. By the time the actual purchase of PokerStars by Amaya was officially announced, the stock price for Amaya had nearly tripled and, since that point, it has peaked in price at more than five times what it was worth after the first quarter 2014 financial reports.
The Globe and Mail states that this is one of the largest inquiries into the actions of a company that falls under its self-regulation. FINRA is reportedly looking at “prominent Canadian brokers, money managers, hedge funds, and business executives” who may have utilized inside information to get a jump on the markets.
While FINRA’s inquiry isn’t an official action from the US Government, its timing is difficult for Amaya. In December, the Canadian government raided the offices of Amayathrough its regulatory agency, Autorite des Marches Financiers (AMF). The AMF confiscated computers, paperwork, and other property, looking into the potential for insider trading.
Amaya stated to The Globe and Mail that it is cooperating with FINRA’s “request for information.” The Globe and Mail also quoted Amaya officials as saying FINRA’s inquiry “does not necessarily lead to an investigation” and that only the Canadian action is considered a true “investigation” of the company.
The new inquiry from FINRA, along with Canada’s AMF investigation, has had a significant effect on Amaya Gaming stock. Following the start of the Canadian investigation in December, Amaya’s stock plunged on the Toronto Stock Exchange from $35.06 to $27.50. The stock had been able to recover to $34.25 as recently as February 5, but the announcement of the FINRA inquiry has knocked it down again. As of Wednesday morning, Amaya is trading at $31.54.