Regulators probe unusual Dow Jones trading

New York, May 6: Dow Jones&Co. Inc said today the New York state attorney general and US securities regulators were investigating unusual trading in its stock and options before it announced a takeover bid by News Corp.

Dow Jones, which runs a financial newswire service and publishes The Wall Street Journal newspaper, said on Tuesday it received a 5 billion dollars bid from News Corp, shortly after CNBC reported the offer that morning.

A Dow Jones spokesman said the company received a subpoena from the attorney general and an inquiry from the US Securities and Exchange Commission.

A spokesman for News Corp said his company had received similar documents.

A surge in volume in Dow Jones' June and September call options as late as Monday suggested to some analysts that some investors knew an offer was in the works but were unsure about the exact timing.

On Monday, the September 45 call options traded 3,464 contracts in a range of 30 cents to 35 cents, while 641 of the June 40s traded at 25 cents, according to Michael Schwartz, chief options strategist at Oppenheimer&Co Inc in New York.

Typical daily average March volume in Dow Jones call options is about 85 contracts.

Call options allow holders to buy stocks at a specific price and time.

News Corp offered to buy Dow Jones for 60 dollars per share and had submitted an offer letter to the Bancroft family, the controlling shareholder group, as long as two weeks ago, Dow Jones said on Tuesday.

Dow Jones stock jumped nearly 61 percent on Tuesday, hitting a session high of 58.47 dollars on the New York Stock Exchange.

Dow Jones options rose far more spectacularly. The September 45s rocketed 3,271 percent to 12.10 dollars from Monday's close of 35 cents. The June 40s surged 5,300 percent to 16.20 dollars after ending Monday's session at 30 cents.

Reuters>