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Inhibitex Deal Leaked Or Just 'Exceptional' Timing?

Tyler Durden's picture





 

Early Friday morning, Jon Najarian of optionMONSTER fame noted (on his site as well as CNBC) some 'unusual' action in an illiquid little stock called Inhibitex (INHX). It turns out that over the weekend, that same company was purchased by BMY for $2.5bn (or $26 per share - more than double the closing print of $9.87 on January 6th). This won't be the first time we have 'helped' Mary (Schapiro) and her little SEC lambs but it seems surprising that this would not generate at least an 'alert' when as Najarian so promptly pointed out on Friday - a total of 11,138 calls traded against only 937 puts with this call volume more than half the entire call trades of the month of December (when 19,000 calls changed hands). Friday's call activity was more than 12 times average, with the $10 Feb Calls' volume over 17 standard deviations above normal.

This isn't the first time sizable call volume (green above versus put volume - red) has been seen but it is the most extreme example of the kind of well-informed trading that we have discussed again and again with regard healthcare specifically.

The largest trade that stuck out was the purchase of 2,000 Feb 10 calls for $2.00. Based on the BMY takeover price, these calls are now worth $16 ($26 minus the $10 call strike). That means the well-informed (lucky) owner turned $200,000 into $3,200,000 over the weekend.

While some of the action could potentially be discounted as front-running the JPMorgan Healthcare conference next week, we leave it to you to judge the option volume for itself: either the deal was leaked or the buyer of these calls had exceptional timing and is now considerably richer.

Charts: Bloomberg

 


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Mon, 01/09/2012 - 00:29 | Link to Comment HoofHearted
HoofHearted's picture

It's a great big club....well, we know what Carlin said about it...

Mon, 01/09/2012 - 00:48 | Link to Comment UP Forester
UP Forester's picture

You get hit by it?

Mon, 01/09/2012 - 01:00 | Link to Comment GiantVampireSqu...
GiantVampireSquid vs OWS UFC 2012's picture

You aint in it.

Mon, 01/09/2012 - 01:23 | Link to Comment lineskis
lineskis's picture

"Congressmen legally bought 11,138 calls. Which they are still allowed to do, because insider trading is so for the average citizen...

Thank you for your inquiry and keep up the great job ZH, because watching porn is reaaally time consuming. Did you know 60% of the web traffic is porn related?

Love,

Mary Schapiro"

Mon, 01/09/2012 - 01:44 | Link to Comment Manthong
Manthong's picture

Whoever sold those calls out to be a little put out..

Unless, of course it was from the same class of folks who funded Hillary's $100K cattle position or bought and sold that million dollar silver  put last April and May. 

Mon, 01/09/2012 - 01:43 | Link to Comment ihedgemyhedges
ihedgemyhedges's picture

Mary,

Some of us women are just really smart, aren't we?????????!!!!!!!!!!!

Sincerely, Hillary Clinton Pork Belly Futures LLC

Mon, 01/09/2012 - 04:16 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Actually cattle futures.....but whatevah....

Mon, 01/09/2012 - 06:39 | Link to Comment smlbizman
smlbizman's picture

poll alert.....

what is more legit:

WWE wrasslin

santa

financial system

Mon, 01/09/2012 - 00:29 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Thanks, Zero Hedge. Good stuff.

I eagerly await the results of the intense (probably already underway) SEC investigation, spearheaded by Mary Schapiro. /SARC

Mon, 01/09/2012 - 12:06 | Link to Comment bdc63
bdc63's picture

Investigation?  There's not going to be any investigation (or if there is, it will just be for show).  The inmates are fully incharge of the prison now. 

Mon, 01/09/2012 - 00:37 | Link to Comment bob_dabolina
bob_dabolina's picture

So like the options action in AMR right before 9/11 but the inverse here (calls vs. puts)

...did they ever find out who bought those puts? It would have taken the SEC, what, 2 phone calls to figure it out.

Mon, 01/09/2012 - 01:52 | Link to Comment ihedgemyhedges
ihedgemyhedges's picture

"It would have taken the SEC, what, 2 phone calls to figure it out."

Be fair, will you.  The SEC made 100s of calls, they just happened to be to 900 #s.............

Mon, 01/09/2012 - 00:37 | Link to Comment Theta_Burn
Theta_Burn's picture

After what Corzine & co. pulled off? what rank amatures.

 

Mon, 01/09/2012 - 00:43 | Link to Comment Hephasteus
Hephasteus's picture

So romney needs cash beyond the billion he stole and a drug to protect him from swine flu?

Mon, 01/09/2012 - 00:44 | Link to Comment fourchan
fourchan's picture

sop prolly a congressman.

Mon, 01/09/2012 - 00:45 | Link to Comment GoldmanSux
GoldmanSux's picture

Hey Schapiro. Do your job! This happens prior to each takover because no one respects you.

Mon, 01/09/2012 - 00:47 | Link to Comment Robslob
Robslob's picture

 

 

It was the French president's wife right...all of the calls that is?

Mon, 01/09/2012 - 00:48 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Rigging? In the markets?

Say it isn't so....I can feel my innocence slipping away....hark the song of the siren...

ori


Mon, 01/09/2012 - 01:29 | Link to Comment Hephasteus
Hephasteus's picture

Hey you indians have been doing some great work lately. Glad you all are on the cleanup crew.

http://apple.slashdot.org/story/12/01/08/069204/leaked-memo-says-apple-p...

Kind of tough to weasel around these days when they keep giving the keys to the mansion to all the kings and people keep stealing them.

Mon, 01/09/2012 - 00:51 | Link to Comment itchy166
itchy166's picture

Congress buying, no crime here...

Mon, 01/09/2012 - 01:47 | Link to Comment ebworthen
ebworthen's picture

I'm certain there will be a full investigation, and a press conference, and a 372 page report - and absolutely no one sent to jail.

Mon, 01/09/2012 - 00:59 | Link to Comment ekm
ekm's picture

What if Mary Schapiro owned most of the calls?

Mon, 01/09/2012 - 01:00 | Link to Comment ekm
ekm's picture

I'm pretty sure I found the perpetrator. Wow, I'm brilliant.

Mon, 01/09/2012 - 01:00 | Link to Comment hankwil74
hankwil74's picture

All the world's a stage, and everyone not in upper ranks of the banking industry, merely pawns

Mon, 01/09/2012 - 01:01 | Link to Comment lizzy36
lizzy36's picture

Probably nancy pelosi's husband.

Or one of the other congressmornons. After all Congress is the best HF in the USA. 

Mon, 01/09/2012 - 01:03 | Link to Comment ReallySparky
ReallySparky's picture

You know for a second I considered typing, "It was me", then I remembered a similar story here on ZH a while back. Someone prolly already used that line. This crap is so blatant and predictable. Glad I took my ball home two years ago. You can not win/invest in this unregulated criminal market. Everyday I just shake my head in disgust.

Mon, 01/09/2012 - 01:05 | Link to Comment Robslob
Robslob's picture

 

YAH

 

Yet Another Hildebrand 

Mon, 01/09/2012 - 01:12 | Link to Comment sara29
sara29's picture

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Mon, 01/09/2012 - 01:18 | Link to Comment dogpoet
dogpoet's picture

Don"t know other skew's history, but some one has been taking th gamble just as big.  There has been 7 count them 7 spikes very similar in spike over the months of dec. and nov.  Probably take over fodder in the blogosphere for 6 months., potentialy a lucky hit for purchasers.

 

 

 

Mon, 01/09/2012 - 01:18 | Link to Comment roseByAnotherName
roseByAnotherName's picture

So who lost out?
Is it the less informed sellers?
No, they sold cause they didn't value what they held. Their possession of material non-public information (or the lack thereof) isnt the main issue here.

Is it the acquiring company?
Not unless it affected the purchase price. This, while possible, doesn't seem to be the case.

Is it the general investor in capital market?
Yes, to the extent that he/she is ignorant of the rampant misuse of material non-public information.

Let's assume investors aren't all that dumb and so, rightfully they lose confidence (at least at margin) in capital markets which directly affects growth and prosperity of Joe Six-pack!

But behold our captain's asleep at the wheel! Conveniently unaccountable for his unkept promises. We are obligated to wake him up. So, let's do so and tell him we know what's going on here...

By restoring confidence, my captain, is how you create prosperity. So wake up and steer this titanic away from its current path. You can start by cleaning up our white collar thieves. Good luck!

Mon, 01/09/2012 - 01:35 | Link to Comment ItsDanger
ItsDanger's picture

What did Gekko say?  If you're not on the inside, you're on the outside.

Mon, 01/09/2012 - 02:04 | Link to Comment Teamtc321
Teamtc321's picture

Gekko say's blue horse shoe likes Bernaked and Co. 

Mon, 01/09/2012 - 02:22 | Link to Comment TheLooza
TheLooza's picture

  Over on the pharmasset board (VRUS) they had been chatting about INHX being a likely target since the VRUS acquisition by Gilead since early december.  Doesnt; explain the big spike in the last couple days, but this wasn;t out of the blue.

 

http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_P/threadvie...

Mon, 01/09/2012 - 02:39 | Link to Comment BlackSunshine
BlackSunshine's picture

The Market Maker got his ass handed to him. If anything, the MM would tell the SEC before the SEC reads about it on ZH. The SEC won't do anything about it either way, as stated in previous comments.

It's great to look forward to another republican president where insider trading and front running will again be the norm. I applaud Najarian for just announcing it on CNBC so everyone sees it. The argument that insider trading shouldn't be illegal because the market would then be more transparant and reflect information more efficiently might have some merit. But in reality, it doesn't matter, because too much money is made by insider trading, and the little people are not supposed to profit from the markets, we are supposed to donate.

Why bother. Take out giant credit lines and buy gold bitchez, watch the debt melt away via hyper-inflation.

Mon, 01/09/2012 - 03:09 | Link to Comment ZeroPower
ZeroPower's picture

Nah, any pro delta hedges. Obviously your hedge is never 1:1 especially in a takeover scenario, but good enough.

Mon, 01/09/2012 - 03:03 | Link to Comment ACP
ACP's picture

If it's me, exceptional timing. If it's someone else, criminal activity.

Mon, 01/09/2012 - 03:19 | Link to Comment Bear
Bear's picture

So how many of these were Jon Najarian of optionMONSTER?

Mon, 01/09/2012 - 07:07 | Link to Comment Burr's 2nd Shot
Burr's 2nd Shot's picture

2000 Feb 10 Calls at $2 would be $400k, not $200k.  Just sayin...

Mon, 01/09/2012 - 07:21 | Link to Comment FoieGras
FoieGras's picture

Congrats to the buyers. Capitalism rules.

Mon, 01/09/2012 - 08:17 | Link to Comment I should be working
I should be working's picture

Well GILD did acquire Pharmacet, who have a similar Hepatitis C drug for 11B. 27 a share though, holy crap.

For my money this means one thing, buy VRTX. They already have a hep C drug and for 6 times next years earnings still look cheap. Incivek is going to be 2B a year before any of these are out of the clinic.

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