THE London Stock Exchange is proceeding with a full scale investigation into suspected insider trading in Pan Andean shares on Tuesday. Pan Andean, whose chairman is Dr John Teeling, is registered in Ireland but is quoted on the Alternative Investment Market (AIM) in London.
The exchange, which does not officially comment on its investigations, is known to be examining all dealings in the stock on Tuesday, following heavy selling ahead of the disappointing drilling results from its oil exploration activities in Bolivia.
In the wake of the heavy selling on Tuesday, Pan Andean shares dropped from 115p to 40p, wiping more than £17.9 million off the value of the company. The shares, which are quoted on London's AIM Market, fell further yesterday, dropping another 3p to 37p.
A spokeswoman for the exchange has refused to deny or confirm the investigation, but stated that it has been in contact with Pan Andean's nominated advisers in Britain, Rowan Dartington. The London Stock Exchange is bound by its own rules to look at dealings where the share price has moved by more than 10 per cent.
The share price started to collapse on Tuesday after one investor put a substantial block of shares on the market just hours before Pan Andean announced that it had failed to find oil in any commercial quantity at its Chapare oil field.
The investigation is understood to be focusing on share dealings put through by London based brokers, Branston & Gothard, early on Tuesday. The firm is believed to have acted for a British based accountant who learned of the drilling result before the announcement.
Mr Len Oram, a director off Branston & Gothard, said yesterday the firm was "collating any information in that regard at the moment" but was unable to comment beyond that.
Some market sources have suggested that the deal may not have technically breached stock exchange rules. The firm's client is understood to have sold shares he did not effectively own, buying them back more cheaply after the bad news became public.
This "short selling" immediately undermined the share price, and forced Pan Andean to formally disclose the drilling result to the stock exchange. Brokers have estimated that more than 500,000 shares were sold in London on Tuesday on the back of the result.
Pan Andean has a 20 per cent carried interest in the Bolivian project operated by Australian exploration giant, BHP Petroleum. To date, BHP is estimated to have spent close to $27 million (£16.8 million) on seismic studies - and its drilling operations.
The group had a full 20 per cent carried interest in the first well, but will only have a 10 per cent carry for the second well. This means Pan Andean will have to fund 10 per cent of the cost of the second well in the Chapare block.
It is not clear how Pan Andean intends to fund this commitment, but raising funds through a share issue is unlikely, given the circumstances surrounding Tuesday's collapse in the share price.
