Amazon Denies Report of Insider Trading Investigation

An Amazon.com (Nasdaq: AMZN) spokesperson told the E-Commerce Times on Friday that the e-tail giant has not been notified of a reported U.S. Securities and Exchange Commission (SEC) investigation questioning stock sales made by Amazon chairman and chief executive officer Jeff Bezos.

Earlier, the New York Times, citing "a person close to the matter," reported that the SEC is looking into the February sales , which Bezos reportedly made before a negative analyst report about the company was made public, but after company executives had seen an advance copy of the report.

"We're not aware at all of any investigation," Amazon spokesperson Bill Curry told the E-Commerce Times. "If there ever is one, we'd certainly be happy to help."

The February 6th report, by a Lehman Brothers bond analyst, sent Amazon shares lower by predicting that Amazon could face a cash crunch later this year and advising investors to avoid Amazon convertible bonds.

Big Concerns

Ravi Suria, vice president of convertibles strategy at Lehman, said that Amazon's latest quarterly results had "only increased our concerns about tightening liquidity."

Amazon's working capital has been declining since a debt offering in the first quarter of 2000, Suria wrote, and is likely to "dip into negative territory" this year without an additional infusion.

"We believe that the low levels of working capital could trigger a creditor squeeze in the second half of the year, creating considerable downside risk to revenue and cash estimates for the second half," he wrote.

Timing Tension

On February 17th, the Seattle Post-Intelligencer reported that Bezos sold Amazon stock, in two batches of about 400,000 shares each, on February 2nd and 5th. The total value of the sales was approximately US$12 million.

Curry told the Post-Intelligencer that the timing of Bezos' stock sale had more to do with the release of the company's quarterly earnings report than Suria's report. Company policy prohibits trades until three days after earnings results are announced.

Amazon officials did see "a version" of the analyst report ahead of its publication, Curry said Friday, "but we were unaware of what the final version was going to be and when it was going to be distributed."

"The report contained nothing new," Curry said. In fact, he noted, Amazon shares actually ended higher on February 6th, the date the report was issued.

Swimming Upstream

Bezos' first sale came on the first day of open trading for Amazon insiders following the company's fourth quarter earnings report, which contained news of 1,300 layoffs and a warning of slowing growth, but also a pledge for profitability by year's end.

Amazon also announced in the report that it planned to take a $150 million charge to earnings during the first half of the year to cover the layoffs.

Amazon reported an operating loss of 25 cents per share for the quarter, a penny better than expected. Sales for the quarter rose 44 percent from a year earlier to $972 million.

Amazon stock was up 44 cents at $12.13 in morning trading Friday.