Stocks quoted in this article:
Before the bell, Siemens announced that it would buy Efficient Networks (EFNT – 23-1/16) for $1.5 billion or about $23.50 per share, pending regulatory approval. EFNT supplies high-speed digital subscriber line customer premise equipment for the broadband access market.
The company took its shares public in July 1999, releasing 4 million shares at $15.00 per share. A secondary offering came to market in February 2000, releasing another 5 million shares priced at $70.00. The shares peaked at a little over 186 in March of 2000.
In other words, while the buy-out story caused the stock to surge over 87 percent, a lot of stock traded at a much greater premium to the $23.50 offer.
There is little advantage to trading the shares post-news since after the gap, on the open, the shares have traded within a 3/16 point range.
With little additional gain to the options players, we have seen 580 put options trade today, compared to 2,324 call options. This compares to current open interest (in options with up to three months' of life left) of 3,973 open put positions and 5,206 call open positions. A good deal of the activity will probably result in the liquidation of positions.
The peak open interest front-month option is the March 15 call. The option was bid yesterday at 5/8 (as an out of-the-money option) and currently holds a bid of 7-7/8 (as an 8-1/16 in-the-money option).
We have noted 1,010 contracts trade on the out-of-the-money March 25 call. The majority of the trades went off at the bid of 1/16. Compared to current open interest of just 165 contracts, these were most likely call writes. The trader was able to scalp $6.00 per contract on a strike $1.50 above the price Siemens is paying for the company.