Can a CEO declare ‘imminent chaos’, wait for the share price to fall sharply, and then engage in aggressive share buybacks and dividend payouts or would this be illegal?

Jo Bloggs is a shareholder CEO at FireworksCorp, which has a large cash position. She warns investors of 'imminent chaos' without giving further details. The share price plummets. The firm then buys back a large number of shares and declares a large special dividend. Jo Bloggs does not sell her shares but collects her special dividend and steps down as CEO.

'Imminent chaos' was certainly truthful. Share buybacks in undervalued firms is sound action, and paying a large special dividend is clearly the right course of action to maximise shareholder value in this case. Jo Bloggs steps down from FireworksCorp, buys a big boat and sails out into the Mediterranean.

Has she broken the law and if so, at which stage?

Submitted August 09, 2017 at 10:40AM by moomin100


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