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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 | 2045778 HoofHearted
HoofHearted's picture

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

Mon, 01/09/2012 - 00:48 | 2045820 UP Forester
UP Forester's picture

You get hit by it?

Mon, 01/09/2012 - 01:00 | 2045838 GiantVampireSqu...
GiantVampireSquid vs OWS UFC 2012's picture

You aint in it.

Mon, 01/09/2012 - 01:23 | 2045875 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 | 2045904 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 | 2045906 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 | 2046037 Clowns on Acid
Clowns on Acid's picture

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

Mon, 01/09/2012 - 06:39 | 2046087 smlbizman
smlbizman's picture

poll alert.....

what is more legit:

WWE wrasslin

santa

financial system

Mon, 01/09/2012 - 00:29 | 2045780 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 | 2046626 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 | 2045783 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 | 2045917 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 | 2045797 Theta_Burn
Theta_Burn's picture

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

 

Mon, 01/09/2012 - 00:43 | 2045807 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 | 2045810 fourchan
fourchan's picture

sop prolly a congressman.

Mon, 01/09/2012 - 00:45 | 2045811 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 | 2045813 Robslob
Robslob's picture

 

 

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

Mon, 01/09/2012 - 00:48 | 2045819 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 | 2045884 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 | 2045823 itchy166
itchy166's picture

Congress buying, no crime here...

Mon, 01/09/2012 - 01:47 | 2045832 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 | 2045837 ekm
ekm's picture

What if Mary Schapiro owned most of the calls?

Mon, 01/09/2012 - 01:00 | 2045840 ekm
ekm's picture

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

Mon, 01/09/2012 - 01:00 | 2045842 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 | 2045843 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 | 2045844 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 | 2045849 Robslob
Robslob's picture

 

YAH

 

Yet Another Hildebrand 

Mon, 01/09/2012 - 01:12 | 2045857 sara29
sara29's picture

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Mon, 01/09/2012 - 01:18 | 2045865 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 | 2045867 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 | 2045894 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 | 2045932 Teamtc321
Teamtc321's picture

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

Mon, 01/09/2012 - 02:22 | 2045954 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 | 2045971 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 | 2046003 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 | 2045998 ACP
ACP's picture

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

Mon, 01/09/2012 - 03:19 | 2046010 Bear
Bear's picture

So how many of these were Jon Najarian of optionMONSTER?

Mon, 01/09/2012 - 07:07 | 2046098 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 | 2046101 FoieGras
FoieGras's picture

Congrats to the buyers. Capitalism rules.

Mon, 01/09/2012 - 08:17 | 2046135 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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