Options Scare Hits SafeNet, Juniper
SafeNet Inc. (Nasdaq: SFNT) and Juniper Networks Inc. (NYSE: JNPR) shares were among the hardest hit, losing 22 percent and 6.5 percent of their value in the market, respectively.
Safenet and Vitesse Semiconductor Corp. (Nasdaq: VTSS) are among five companies served with federal subpoenas as authorities peer into stock-option cases that have snowballed into major scandals. SafeNet shares today lost $4.28 (22.28%) to close at $14.93. Vitesse shares, which have lost nearly half their value in the last month, traded up $0.09 (5.36%) to $1.77
Both companies said yesterday that they've been served by the U.S. Attorney for the Southern District of New York. (See SafeNet Gets Subpoenaed and Vitesse Gets Subpoenaed.)
Meanwhile, analysts are starting to delve into other companies's option grants, including those of Juniper and F5 Networks Inc. (Nasdaq: FFIV), seeking correlations to stock prices. It's not exactly The Da Vinci Code, but the work is turning up some results.
The Center for Financial Research and Analysis says it's identified suspicious options timing at 17 companies. And JP.MorganChase analyst Ehud Gelblum, after researching options activity at 14 companies, reported this week that Juniper and F5 granted some options at particularly fortuitous times.
"We just received the [Gelblum] report, and we're looking into this," an F5 spokeswoman says. Juniper was not immediately available for comment.
The options scare appeared to be weighing on Juniper shares, which lost $1.04 (6.46%) to $15.06 in trading today. F5 shares rose modestly, adding $0.16 (0.32%) to $50.61.
For now, however, the official legal investigation is limited in scale. In addition to SafeNet and Vitesse, companies subpoenaed from New York include semiconductor equipment manufacturer Brooks Automation (Nasdaq: BRKS) and healthcare-benefits firms Caremark Rx Inc. (NYSE: CMX) and UnitedHealth Group (Nasdaq: UNH).
The Securities and Exchange Commission (SEC) is getting into the act, too. Yesterday, SafeNet said it's been asked for documents as part of an "informal inquiry" from the SEC. Vitesse, apparently under a full-blown inquiry, said the agency has asked it for documents dating back to Jan. 1, 1995.
These investigations appear to be probing the possible back-dating of certain stock options, a practice that can wring extra profit from shares by matching the option date with a stock's low point.
In Vitesse's case, an internal investigation into the options matter has uncovered issues related to the company's earnings reports as well. That's led to three executive firings earlier this week -- of the CEO, CFO, and former CFO -- and the possibility of earnings restatements. (See Vitesse Execs Get the Axe.)
Vitesse wouldn't be alone. Brooks recently reported it may restate earnings reports as far back as 1999.
SafeNet and Vitesse both say they plan to cooperate with the SEC and U.S. Attorney investigations.
— Craig Matsumoto, Senior Editor, Light Reading