IPOs and business ethics

I'll chime in here...

The information that you have access to concerning the company's projected growth; is this confidential or is it available to the public?  If it's confidential, then personally I would be concerned about it being the right thing to do.  But I'm no lawyer or investment guru.  I just personally would have some reservations about making an investment based upon confidential insider knowledge.

As far as notification for the IPO, your broker or investment management company has information on upcoming IPOs.  I would contact them and let them know if you are interested.  I have never been in on an IPO but I believe there are some qualifying/selecting criteria in advance of the IPO.

My company just went through the whole IPO process.

Previously, we had corporate stock based on our revenue set by the higher ups. We went through the IPO, everything was frozen until it went public. Now, we can do as we wish. As far as I know, and what we've gathered in the Q & A session, we can trade/buy/sell, etc at will.

However, we cannot disclose or use our inside knowledge to sway the public one way or the other. I can recommend our stock, but I can't tell you that we just did something huge, the stock price will rise, so buy buy buy.

It still seems odd having inside information, but as far as we've been informed, it's normal.

"Ever wonder why fund managers can't beat the S&P 500? 'Cause they're sheep, and sheep get slaughtered."

Insider trades are often restricted to certain windows to try and minimize the potientiol for insider trading.  The trading windows usually begin after quarterly earnings are announced and up to a few weeks before the next quarter is announced.  I would ask your HR or Finance department for clarification before trading. 

I believe the insider trading laws are written so one cannot profit from insider knowledge, not just to limit the disseminteion of the that knowledge.  So, for example, if you know your company just landed a big new contract but that info is not yet public, you should not trade stiock in your company until that information is made public. 

If you don't work for the company, have not signed some sort of confidential information form and have not received any written or verbal communication from someone within the company (sounds like maybe you have?), you are probably safe in buying/selling stock in that company.   It sounds like you are working on pretty general knowledge, not necessarily material information that will lead directly to their bottom line, like knowing that their earnings so be released in 2 weeks will surpass analysts expectations.....  It would be like me seeing a company breaking ground on a new manufacturing plant and inferring that their sales must be going up.  Obviously check with a transactional attorney to be the safest, especilly if you will be making large trades.  And if that is the case, send me some money so I can buy a new P3. 

If the information is public, then you will be safe for sure.

Have you signed any confidentiality agreements with this customer? 

If so, then you might have material, non-public information (i.e. information that hasn't been publicly disclosed in a press release or official SEC filing AND an investor might consider significant when making decisions).  Even if you do, this information should be marked specifically as confidential to be protected under your agreement.  You can still be prosecuted for insider trading if you use the info to your advantage. 

If not, be cautious for a couple of reasons.  First, how long will a company that isn't diligent about protecting proprietary information survive?  Second, they may not be disclosing the whole story and you're just getting the positive highlights.  Overall, if you don't have a signed confidentiallity agreement, assume that you're not getting any material information. 

Disclaimer: I'm a consultant that, on occasion, helps take companies public.  ETA: I have never participated in an IPO or traded where I had insider information.

There are two black and white issues, and a couple grey ones, where ethics, smart business, and reality differ.

Black and white issue 1) : Your obligation to the company that might IPO. That's framed by either something you signed, (confidentiality, NDA, etc), or your commercial contract with that company (SOW, T's and C's on your PO, or theirs). Generally, in companies that have lots of IP and are very sensitive to the press, they will include a gag order clause so some sales clerk at a supplier doesn't blab it on yahoo finance and get the message boards all hopped up.  Check your particular obligations.

Black and sorta white issue 2) Whether you are considered an insider. There's a strict definition that you don't fit, but an imputed definition that you might fit. In general, if you get privleged information by virtue of your relationship, you're not free to exploit it, and you need to disclose the profit to your principals. What makes this one black and grey is that I'm not sure who your principals are: whether your customer would be more at risk you traded, or to your own company's reputation, because you used information for personal profit on your customer's information.

Now for the reality and gray part of things

- Insider trading is rampant, both in the IPO market, and the public market. We know this. IPO's have friends and familly offerings, employees are almost always allowed to participate in an IPO before the general public. The law strives for equal knowledge, but that's just not feasible. So it's grey.

- Insider trading is very hard to prove, in reality. Did you get your information from the company, or a message from someone else, or a message board?  It's very rarely prosecuted for this reason (50 or less prosecutions in most years, with a spike in the dot-com days). The burden of proof is high.

- Insider trading, when prosecuted, is restricted (usually) to board members, corporate officers, and key institutional shareholders (banks, lawyers, etc). They're not at all interested in prosecuting 700 mid-level managers that made $800. They're interested in letting everyone know that the SYSTEM cannot be gamed, at scale. If you don't make a monster trade, they won't care.

And I think all this ^^^ probably supports the conclusions you've already drawn. Ethically, it's not right. Business-wise, it could put your company and your client at risk - it violates trust, which I think you need in a sales role.  But if you did decide to trade, the chances of anyone noticing, much less doing anything about it, are nil.