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The U.S. Securities and Exchange Commission filed a law suit Thursday against a group of investors it thinks profited from inside knowledge of a CNS Inc.'s pending sale to United Kingdom-based pharmaceutical company GlaxoSmithKline.

The SEC suit, which was filed in U.S. District Court in Pennsylvania, alleges a group of yet-unknown investors bought options for 118,600 shares of CNS stock in the weeks before the deal was made public, according to news reports. The SEC alleges that when CNS' shares shot up almost 30 percent after Monday's announcement, the investors then cashed in the options for more than $600,000 in profits. Glaxo is paying $37.50 per share for each CNS share, which is a 31 percent premium to the value of CNS shares before the deal.

Will this affect the deal? From the limited info available, it does not seem like the company is a target, just the investors. Now, if the group turns out to include executive management or the board of directors, I imagine things could get sticky. Then the sale could be in jeapordy and the stock take a nose dive as other shareholders sue the investigated shareholders.

Who thinks if true, then these people were stupid, not only for insider trading, but for cashing out for profit instead of waiting for the full sale price...
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