Smelling financial opportunity in a Canadian drug company with a penchant for making deals, hedge-fund manager William Ackman teamed up with Valeant Pharmaceuticals to help launch a hostile bid for the rival manufacturer Allergan.
Ackman built a substantial position in the target company that escaped notice entirely until the eve of the takeover announcement.
Once news of the bid went public, Allergan shares skyrocketed in value, making Ackman a neat paper profit and revealing strong market support for the potential deal.
So what's wrong with all that?
A lot, according to some market watchers, who consider Ackman's gambit to be the latest flavor of legal insider trading—and an unappetizing one as well.