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MSCI Share Price Plunges

On Oct. 2, Vanguard Group announced that some of its mutual funds planned to drop MSCI as the provider of the market benchmarks the funds track and switch to indexes from the University of Chicago’s Center for Research in Security Prices, while six foreign stock funds will begin tracking FTSE indexes.

The news promptly caused MSCI’s share price to tumble. MSCI’s stock price was around $36 in September, but dropped to about $27 following Vanguard’s announcement.

More interesting, however, may be the footnote to the MSCI story. As reported in a blog by the Securities Litigation & Consulting Group, a substantial insider sale took place less than a month before the MSCI/Vanguard news.  The insider was C.D. Baer Pettit. Pettit, according to the Form 4 filed with the Securities and Exchange Commission (SEC), was Head of Index Business at MSCI on Sept. 7, 2012, when the transaction took place.

Pettit sold more 72,000 shares of MSCI – or more than 38% of his ownership. According to the SLCG blog, the average price Pettit received from that sale was $36.61. (The transaction was executed in multiple trades at prices ranging from $36.52 to $36.69.)

The price is nearly $10 more than what Pettit would have received had he waited a few weeks to sell his shares.

MSCI’s closing price on Oct. 1, 2012 was $35.82 and the closing price on Oct. 2, 2012, was $26.21.  The shares Pettit sold on Sept. 7, 2012, would have lost more than $694,572.

Meanwhile, Pettit’s transaction coincidentally accounted for more than 38% of MSCI shares sold by insiders during the 12 months preceding the sale.

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