The Securities and Exchange Commission today charged Rite Aid employee David M. Mahan with insider trading based on nonpublic information regarding a potential merger between Walgreens Boots Alliance, Inc. and Rite Aid.
According to the SEC’s complaint, on January 18, 2017, Mahan learned through his employment that the publicly-announced merger between Rite Aid and Walgreens likely would not close by January 27, 2017 as expected. The complaint alleges that, the next morning, Mahan sold all of his Rite Aid stock and exercised and sold all of his available Rite Aid employee stock options. On January 20, 2017, a news article citing multiple sources reported that Federal Trade Commission (FTC) officials likely would not approve the merger by the deadline. Rite Aid’s stock price fell, closing approximately 13% lower than the prior day’s closing price. The complaint alleges that, by selling his Rite Aid stock and exercising and selling his Rite Aid stock options before the FTC’s concerns became public, Mahan avoided a loss of over $87,000.
The SEC’s complaint, filed in federal court in the Middle District of Pennsylvania, charges Mahan with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. Without admitting or denying the allegations in the complaint, Mahan has consented to the entry of a final judgment permanently enjoining him from violating the charged provisions of the federal securities laws and ordering him to pay disgorgement of $87,277, plus prejudgment interest of $12,107, and a civil penalty of $87,277. The settlement is subject to court approval.
The SEC’s investigation was conducted by Megan Ryan and supervised by Scott A. Thompson and Kelly L. Gibson, of the SEC’s Philadelphia Regional Office.