Glaxo Bulls Awaken With Calls As Pfizer Merger Chatter Escalates
By Sofia Horta E Costa
Options traders are getting busy with a U.K. stock they have rarely paid attention to.
Volume in GlaxoSmithKline Plc contracts surged to the highest level since 2007 this month, with traders paying record prices for bullish options relative to bearish ones. All that after the stock lost $11 billion in value over two months.
Options have become the tool of choice for speculators as analysts flagged the company as a potential acquisition for Pfizer Inc. As deal chatter increases, so does optimism that Glaxo will give in to pressure to shake up management.
?A lot of this is down to rumors about a merger with Pfizer,? said Kari Olsen, a sales trader at Tavira Monaco Sam. ?There is also talk that if the CEO does go, the stock can spike up some 10 percent on the back of people thinking that the company can then start restructuring and sell some assets.?
Almost 800 Glaxo options changed hands on average each day this month. That?s 17 percent more than in April and compares with an average of about 300 contracts daily in the past two years. Calls that profit with a 9.6 percent jump by December are the most owned of all. The stock lost 11 percent since its April high.
Chief Executive Officer Andrew Witty is struggling to revive revenue growth lagging behind competitors. U.S sales have been sluggish, investors have criticized the company?s drug pipeline, and a bribery scandal in China led to a fine of 297 million pounds ($455 million). With Glaxo?s new chairman saying this month he wants to retain Witty, speculation is growing that a takeover is what would boost the shares.