Front page — Wall Street Journal (December 23 2017) — Michael Milken, he of the 1980’s junk bond wave fame and resulting reduced federal prison time for becoming a cooperating witness against his fellow junkers — has proved to have an uncanny ability to make stock donations to charities just prior to steep declines in the value of that stock. For example, in 2003, he donated LeapFrog Enterprises stock to a charity, and its value fell 25% in just one day. Mr. Milken was a company he funded from the beginning. Serendipity? Perhaps, but in September 2013 he donated $27 million in K12 Inc. stock to a charity. Just 26 trading days after this beneficence, K12 stock dropped 38% in one day.
The Wall Street Journal reviewed the Milken donations and concludes that Mr. Milken’s timing was better than 99% of all insiders and shareholders who reported charitable donations of stock for the past 14 years. Mr. Milken’s brother and some associates from the 1980s also made their donations at about the same time as Mr. Milken.
Mr. Milken’s lawyer said that his client and his associates were not officers or directors of the companies whose stock they donated. Just your average investors who “meticulously avoided ever being in a position where they can learn nonpublic information.”
One professor called the donations events of “uncanny timing ability.” No comment.