Insider trading charge relating to Shiseido’s Bare Escentuals acquisition

The Securities and Exchange Commission (SEC) has brought the case in the United States District Court in the Northern District of California and is accusing Zhenyu Ni of insider trading.

According to the lawsuit filed yesterday by the SEC alleges that in November 2009 Zhenyu Ni overheard information regarding a potential acquisition of the mineral make up company when he visited his sister at her office.

Shiseido’s tender offer was first announced publicly in January 2010. During November 2009 and January 2010, Zhenyu Ni had spent almost $165,000 on Bare Escentuals securities, according to the lawsuit.

Following the announcement of the tender offer, Bare stock rose significantly in price, closing the following day at over 40 percent higher than the previous day, the lawsuit claims.

According to the SEC’s complaint, Ni realized illegal profits of $157,066 when he cashed in the securities following the announcement.

Ni has agreed to pay $314,681 to settle without admitting or denying the charges, according to media reports.

Shisiedo’s acquisition of Bare Escentuals was completed in March of last year with the final value of the deal in excess of $1.7bn.

Recent financial results illustrate that although costs relating to the acquisition weighed heavily on the company’s bottom line, sales were boosted by purchase. Excluding revenue from Bare Escentuals, Shiseido’s sales for the first nine months of 2010 actually dropped 1.6 percent compared to the same period in 2009.

No one at Bare Escentuals was available for comment at the time of publication.