© Reuters. FILE PHOTO: Take a look at tubes are seen in entrance of a displayed Abbvie brand on this illustration taken, Could 21, 2021. REUTERS/Dado Ruvic/Illustration/File Photograph
By Saqib Iqbal Ahmed
NEW YORK (Reuters) – Buying and selling within the choices of Cerevel Therapeutics Holdings Inc skilled an uncommon surge together with its inventory worth within the days earlier than Wednesday’s announcement that AbbVie (NYSE:) would purchase the drug developer in a multi-billion greenback deal.
AbbVie mentioned after the market shut on Wednesday it might purchase Cerevel for about $8.7 billion in a bid to interchange income as its huge-selling arthritis drug Humira faces a raft of latest opponents. The announcement got here minutes after Reuters reported a deal was close to.
Cerevel’s shares, which had already risen 42% over the previous three periods, jumped one other 16% to as excessive as $42.75 in buying and selling after the bell. AbbVie’s provide was priced at $45 a share.
The inventory’s rise over the previous few periods was accompanied by a pointy improve in choices exercise. Name and put choices permit traders to purchase and promote shares at mounted costs sooner or later and are used as hedges or methods to take a position on share worth actions.
Cerevel’s choices, which till the latest flurry of exercise traded lower than 320 contracts a day on common, noticed about 51,000 contracts change arms over the past three periods, in keeping with Commerce Alert knowledge.
“This is 100% suspicious,” Matt Amberson, principal at choices analytics agency ORATS, mentioned. “I am almost certain that this was driven by someone in the know.”
The U.S. Securities and Alternate Fee (SEC) didn’t reply to a request for remark out of enterprise hours. Spokespeople for the Monetary Business Regulatory Authority additionally didn’t instantly reply to a request for remark.
Cerevel and AbbVie didn’t reply to a request for remark outdoors of enterprise hours.
The choices exercise took off in sync with the inventory on Dec. 4, with merchants shopping for short-dated upside name choices on Cerevel – contracts that will make cash if the inventory jumped considerably in a short while.
On Dec. 4, Cerevel choices quantity jumped to six,500 contracts, with name choices betting on the inventory rising above $35 by mid-January buying and selling almost 1,800 contracts. The inventory had closed at $26 within the prior session.
Name choices within the inventory ending above $25 by mid-December had been the second most actively traded contracts on Dec 4.
“That’s unusual call activity for this stock,” Kochuba, founding father of choices analytics service SpotGamma.
“Some of this looks fishy … it does not look clean,” he mentioned.
On Wednesday, the most important trades in Cerevel choices had been put spreads – a mix of December put choices that will provide safety towards a slide within the inventory worth beneath $35. Whereas it was not clear what the motive behind Wednesday’s commerce was, Ophir Gottlieb, chief govt of Los Angeles-based Capital Market Laboratories, mentioned the trades might have been a dealer both trying to guard latest positive factors within the inventory worth or speculating that the value rise would show short-lived. Given their timing and their uncommon nature, analysts mentioned the choices trades are seemingly to attract scrutiny from regulators. Choices exercise has been recognized to spike earlier than the general public announcement of offers and the SEC has previously introduced enforcement motion for alleged insider buying and selling involving choices buying and selling.
