Polar Quest

30

After passing the information about the two planes missing from ASRF’s inventory and the suspicious death of Jim Evers on to Langley, Kilkenny returned to his duties as UGene’s acting CEO. According to the monthly reports charting the health of the young biotech company, except for the share price, all of the numbers still looked good.

UGene’s stock took a beating after news broke about the murders and Eames’s arrest. So much of the company was built around the work of its two founders that Wall Street had difficulty imagining how it would survive without them. Fortunately, the company had enough work contracted for the rest of the year to cover all their operating expenses and still turn a modest profit.

Kilkenny bought into UGene at the initial public offering and still held all of his shares despite the plunge. It wasn’t as though he had much choice. By the time he alearned what had happened, the damage to the stock had already been done. At the current price, he was just below breakeven, but the drop from the stock’s previous high had erased a paper profit of several million dollars.

Curious, Kilkenny logged onto his brokerage’s Web site to check the UGene stock. The share price was still down in the low teens, fluctuating by no more than a few cents. The volume of stock trading was also low, a sign that all the fainthearted investors had already abandoned the stock. Thinking about the volume, he wondered about the movement of people’s money in and out of the company. The brokerage site provided a chart of the stock’s daily price range over the past few months, but the volume was just a snapshot of today’s activity.

He logged out of the brokerage site and accessed the Enth site to do some datamining. Unlike Internet search engines that only provide links to Web pages, Enth is tied to databases of information around the world. When he first encountered the site, Kilkenny tested it by requesting a list of all the American League players who hit over 250 against left-handed pitchers in the past ten years. Enth mined several baseball statistical databases and generated the list.

A few seconds later, Enth returned a spreadsheet of the daily trading volume for UGene stock. Kilkenny converted the data display into a graph. Starting at the IPO, the line shot upward as a large number of investors jumped on the company’s bandwagon. Once the initial shares were sold, the volume dropped as most of the investors sat back and waited for the stock to increase in value over time. The trend of low-volume trading continued for several months until mid-February.

‘What the hell is that?’ Kilkenny asked as he studied the mid-month spikes.

He enlarged that graph to show a two-week period in February. Each day was now easily discernible.

‘Sutton was murdered on the fourteenth, and Eames was arrested on the morning of the fifteenth,’ Kilkenny said to himself, reviewing the chronology of events in comparison to the chart, ‘which explains this spike. But what’s going on here?’

In the days preceding the murders, Kilkenny saw a steady increase in trading volume — enough to depress the stock a bit. He was in Antarctica at the time and didn’t recall hearing any news that might have affected the stock. After months of low volume, the sudden jump intrigued him enough that he put a call into an old college friend who now watched the biotech sector for a mutual fund company.

‘Mike, got a question for you.’

‘I’m listening.’

‘Back in mid-February, was there anything going on that spooked investors in your sector?’

‘You mean other than what happened at your company?’

‘Yeah, before that.’

‘There was the usual mixed bag of quarterly projections, nothing too far off the mark. I recall the first few weeks of the year being pretty quiet. Why?’

‘I was poking around with some data on our stock and I came across an increase in volume just before everything went to hell.’

‘Good or bad volume?’

‘Bad, I guess,’ Kilkenny replied. ‘The stock price went down.’

‘It happens.’

‘Maybe, but I just found the timing odd. What suddenly caused someone who’d been holding our stock for months to up and decide to sell?’

‘Investors jockeying for tax time usually drop shares before January first to offset gains and losses. The low-volume trading you see is the little guys who got bored when the stock reached a comfortable level and jumped to something more exciting. I can’t see a big holder dumping a position that’s doing well.’

‘So what do you think this is?’ Kilkenny asked.

‘Looks to me like a short.’

‘A short?’

‘Yeah, sell high and buy low. Here’s how the play works. Somebody thinks your stock price is too high, so he sells a bunch of shares that he doesn’t own. If the price drops, he buys shares to cover his short and pockets the difference.’

‘And if the price goes up, he’s screwed.’

‘Exactly. It’s a gutsy play, especially with your stock.’

‘Why do you say that?’

‘Based on our projections, your stock was priced reasonably. You guys have good cash flow, better than decent market advantage, very little downside. For me to make a short, I want some bad news. I want to see labor trouble or a competitor on the horizon who’s going to steal the company’s lunch money. If somebody did short UGene, they must have been fucking psychic. Until Eames killed Sutton, UGene had nothing but blue sky ahead.’

‘Eames hasn’t been convicted yet,’ Kilkenny said.

‘You think he’s innocent?’

‘I’m not sure.’

‘If he’s not, now’s the time to buy. Of course, this short idea is all hypothetical. I don’t have a clue why your volume jumped.’

‘Is there any way to find out if someone shorted our stock?’

‘Not directly, but a short trade has to come through a brokerage house.’

‘Why?’

‘Since this player is selling something he doesn’t own, he has to borrow it from someone else. Brokerages have access to lots of client shares, so they loan him shares with the understanding that eventually he’s going to buy shares to cover the short.’

‘Can you find out which brokerage houses were behind all those shares?’

‘No, only the SEC can do that. This is the kind of thing they look for when they suspect someone of insider trading or stock manipulation. Why?’

‘I’m just wondering who thought UGene was due for a fall.’

Roxanne Tao rapped on Kilkenny’s door.

‘Mike, I gotta go. Thanks for your help.’

‘Who was that, your broker?’ Tao asked snidely.

‘No. What can I do for you?’

Tao placed a thick file on Kilkenny’s desk. The label read Agabashian, Stepan. ‘Your arms dealer has been

located in Rio de Janeiro. This is the background on him. Interesting reading. Barnett suggests we pay a visit while he’s there. They’re working on arrangements. We’re booked to leave tonight.’

‘I’ll pack a bag. Question, on an unrelated matter. Does the agency have any pull in the SEC?’

‘There is a point of contact that both the FBI and the CIA use when we need information about certain transactions. Anything in particular you want to know about?’

‘UGene. There was an unusual surge in the amount of stock traded in the days just before the murders.’ Kilkenny told her about the hypothetical short sale. ‘It may be nothing, but if it is a short, it’s either a hell of a coincidence or the short-seller knew something bad was going to happen.’

‘How could anyone know Eames was going to kill those two people?’

‘That’s my point. Assuming Eames is the killer, there’s no way anyone else could have known what was going on inside his head unless he talked about it several days beforehand. I’m pretty sure most people who think someone’s planning a murder would call the police and not their stockbroker. That’s why I want to know what’s going on behind this short.’