Saudi Market Regulator Says Suspects Insider Trading In Mobily Shares

Saudi Arabia’s market regulator is investigating possible insider trading in shares of telecommunications operator Mobily relating to its shock earnings restatement, the watchdog said on its website.

The Capital Market Authority (CMA) launched an investigation into Mobily in November after the firm slashed its profits for 2013 and the first half of 2014 by a combined $381 million, citing accounting errors.

Mobily’s woes deepened last week when its audited results revealed it made a $243 million loss last year, not a small profit as previously announced, prompting the regulator to suspend its shares.

The CMA’s preliminary probe [into the company’s earnings releases] “ended in the suspicion” that Mobily had violated one of its listing rules and two articles of the Capital Market Law, according to the website statement.

The listing clause states that once a company’s directors approve its financial results, these must not be revealed to shareholders or third parties prior to official release.

The first article of the law referred to by the CMA prohibits various activities.

These include creating “a false or misleading impression” relating to the price or value of a stock, trading securities that do not involve a true transfer of ownership and trading a stock to induce third parties to do likewise.

It also warns against buying or selling a stock to stabilise its price.

The second clause prohibits trading on inside information not publicly available and that which the insider knows “would have a material effect on the price or value of such (a) security”.

The CMA added it has established a team to review Mobily’s financial statements and related documents, conduct site visits and hear “all concerned parties’ statements”.

Mobily, 27.5 per cent owned by Abu Dhabi-listed Etisalat, did not immediately respond to requests for comment, although it said in a bourse statement on Monday it was “committed to fully cooperate with the relevant authorities … that ensures the protection of the company and its shareholders’ interests”.

About $9 billion has been wiped from Mobily’s market value since its Nov. 3 earnings restatement — the stock’s closing price prior to that announcement was SAR79.75, while its most recent close on Feb. 24 was SAR35.30.

The stock also fell ahead of Mobily’s earnings release, dropping 8.3 per cent in three days to Oct. 29 before the stock was suspended at the company’s request.