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As someone who follows Millennial Media (MM), I was extremely taken aback when looking at what happened to the company's stock yesterday, Tuesday, September 17th. After a few weeks of accumulation the stock understandably traded higher for most of the day, mostly in the high $7.20 and low $7.30 range. This price movement is typical for a stock that has seen accumulation over a few weeks. What typically happens when accumulation occurs is that "weak" shareholders (think day traders) or short-term investors sell their shares to "stronger" shareholders who plan on holding the stock for a longer period than the "weak" shareholders. This results in a decrease in selling pressure and thus the stock price rises. What happened with Millennial Media from the opening bell until roughly 3:25 P.M. was perfectly normal.

Things begin to get weird at approximately 3:25 PM when unusual levels of buying occurred without any news from the company. One can argue that while this is unusual it does not necessarily imply that someone or some people are trading on inside information. However, approximately one hour after the market closed (5:15 P.M), Millennial Media announced a huge deal with AppNexus. This huge deal is expected to boost Millennial's market share. What is even more odd is that, right after the massive buying levels during the end of the day, at the very beginning of after hours trading someone bought 350,000 shares at 4 P.M.

This is extremely unusual because, unless Millennial Media is announcing earnings after hours, the company never and I mean never sees that kind of volume in after hours trading. To put that number in context, the company's three-month average volume is 1.7 million shares a day. As someone who follows this company daily I can tell you that typically there is roughly 100-3000 shares traded during after hours, if any. You should ask yourselves: is it a coincidence that a company that sees very little after hour activity and had not yet announced any news would see someone buy 350,000 shares after hours, only to have huge news come out an hour later? At 4 P.M. the general public knew nothing of the deal so why was someone so compelled to buy 350,000 shares? Traders who followed the stock seemed equally surprised by the huge buying as nothing substantial had occurred yet. [See Figure 1, 2, 3A, and 3B].

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Figure 1

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Figure 2

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(click to enlarge)Figure 3A, 3B

It gets weirder. You would think once Millennial announced the deal that the stock price would rise substantially in after hours trading. However, despite the abnormal volume this did not occur. This leads me to conclude that the news that Millennial Media announced after the market closed was already baked into the price (the 11% rise) before the general public knew about the new deal. The trading pattern reeks of someone having inside information.

This isn't the first time something suspicious like this has occurred. On the day Millennial was set to announce its Q2 earnings, August 12th, the stock price dropped 8%. This drop was after many companies blew away mobile ad estimates, and companies like Northland Securities told its clients to buy Millennial heading into earnings (figure 4). Meanwhile, all major indices were up on the day, so for Millennial to fall 8% on no news the day of earnings is strange. One would expect that a stock with high short interest that is heading into earnings would see its price increase (just a little) with some shorts covering their shares as to not get caught in a squeeze. But lo and behold, when Millennial announced earnings, the company missed on revenue and announced it was buying Jumptap in an all stock deal, which would dilute the current shares outstanding. The day after the earnings announcement, the stock dove roughly 20%. It can be argued in this case too that someone had inside information.

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Figure 4

Conclusion:

It is pretty clear that someone had inside information regarding Millennial Media's deal with AppNexus and I highly recommend that the SEC investigate what took place yesterday with Millennial Media's stock.

Source: Millennial Media: Strange Trading Pattern