For example in an accounts department of a public company how can one prove that the person or group of people recording sales and expenses of a company are NOT investing in the same company?
They would be the first ones to know the balance sheets of the company and they can buy and sell accordingly.
yep......accts dept wld have a heads up on the expenses & sales, & yep they are key to pnl and bal sheet, but you have made a massive assumption that these are the main drivers of pnl (which in the vast majority of listed companies is a wrong assumption) & then share price. also plc's provide quarterly key financial statement updates to the mkts so e'ees have a max of 3mths 'unknown' knowledge (for the UK, at least when i was involved) which the mkt doesn't. plus your ignoring cashflow - where lack of cash has sunk many a decent company.
some other potential pnl / bal sheet drivers which the accounts dept may not be privy too: capital costs (cost of funding e.g. by debt), regulatory adjustments, tax adjustments, investment income, treasury risk exposures, off balance sheet positons, long term liabilities (e.g. rent), asset sales.....and there are many more, unfort it's a long time since i cared much about a b/s.
also its imp to note that even in small companies sales & costs are often split within accounts departments (bought & sales ledgers), so the only person privy to both sales & expenses is the financial controller & above (the FD, MD), the poss additional drivers listed above will form part of the consolidated accts / bal sheet report & prob won't available to anyone below an FC. moreso in larger listed companies.
also you make another assumption that the past is the main determinant in the future price (as you didnt mention anything about sales dep't). deals are being negotiated constantly, pre sales contracts are signed etc which wld never even pass the acccts dept til they were being realised, plus these deals are often made public real time - so the public wld poss know more about it than accts assistants.
however, lets say they did know smthg, e.g. say at a fast growing high tec dildo producing company, the petit accts assistant to the FC had a little peak, when leaning over the desk (blouse open), at the prelim qtr reports and saw profit up 20%. interesting. however, she was also knobbing this wide boy geezer sales rep who had just landed a big $$$ long term contract with a global bongo retailers. naughtily, the little minx was also screwing the mktg manager & had overheard him chatting to a leading bongo magazine director over their recently revised massively reduced advertising campaign, & at the xmas party whilst flirting with the R&D manager got a heads up test on their new fangled toy which also goes out & makes money when you sleep........all of which is v key info. however, only the increase in profit & the R&D info was private, and increased profit was expected cos the new business deals were widely publicised & they had just outsourced payroll & call centres to lala lala land; also they release pre-quarterly budgets, which includes these projections. at least she gets discounted products.
this is also ignoring, as the op did, macro economic influences on share price - so your are still affectively taking a punt. i worked at a property company on an IPO years ago, and pretty much every e'ee loaded up on share options, buying as many as they cld as sales were through the roof, the company was doubling in revenue each year, & everyone wanted a part of it. yet soon after the float the US real estate mkt collapsed, and the share price crashed - the low was 9p i believe, from a float price of c£2. e'ees were stuck with them anyway for a few years - makes them work harder!
agree though, its def not a free mkt, and there is a lot of insider trading going on, but most damagingly at a much more senior level - & involves directors, merger & acquisitons consultants etc etc. all of which is so very hard to police.
