Bobby's Bagels, a publicly traded corporation whose common stock is listed on a stock exchange, just landed a contract to open 100 new stores in shopping malls across the country. The new business should triple the company's profits. Before disclosing the new contract to the public, top managers of the company quietly bought most of Bobby's Bagels stock for themselves. After the contract was announced, Bobby's Bagels stock price shot up from $7 to $52.
1. Where are the stock purchase transactions recorded and reported? Be careful to understand the differences between stock issuances and secondary market transactions.
2. How do you think the managers' purchase of the stock impacted the company's stock price?
3. What are the potential ethical implications of the transactions described in the scenario?
4. Discuss the impact of these transactions on the financial statements of the company and on the non-manager shareholders.