Remember that rumor about Samsung buying BlackBerry? It sounded logical enough, and caused quite the stir. Many rushed to get in front of a camera or slap an editorial out about why it was such a great deal for everyone (or not), and we all started thinking about what it could mean moving forward. The problem was — it wasn’t true. The rumor was just that, but it had ramifications. Stock prices soared for both companies, and now the SEC is investigating.
BlackBerry stock particularly jumped, surging to its highest point in a long time. The SEC — along with the Canadian regulatory office tasked with the same duties, the OSC — are investigating trades made just after the rumor went live. The investigation centers around the source of the rumor itself, and whether or not they had anything to do with the trades, directly or tangentially.
Options were purchased around noon on the day we heard about the buyout, with the rights to purchase 200,000 shares at a strike price of $10 per share. Later in the day — after the rumor broke — BlackBerry stock was up 30%.
Call options closed at a high of $2.55, and were purchased for 10 cents each in a trade. If sold at the peak of the rumor’s effect on BlackBerry stock, whoever purchased those call options could have made up to $490,000 profit.
In the wake of the original story, Reuters (the source) corrected their story to note the discussions on this buyout were between two advisors rather than company execs. If there was inside trading (which will be exceedingly hard to prove), it’ll have a reaching effect, considering all the dominos that fell into place to allow such a gain. Our money’s on a fast-acting trader.