Pandora Media Inc (P) Pops on Corvex Management Stake

Pandora Media Inc (NYSE:P) is higher after Corvex Management revealed a stake and urged a sale

May 17, 2016 at 11:03 AM
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Pandora Media Inc (NYSE:P) is surging 7.4% higher to $10.72, after Corvex Management LP revealed a 9.9% stake in the company -- making it the largest shareholder. Corvex also advised the music streaming service to explore a sale, and said it believes there is "significant strategic interest in the company at a substantial premium to the company's recent stock price." This price action has barely put a dent in P's long-term technical decline, though. 

The stock is down 41.5% year-over year, but today's jump has the shares above their 120-day moving average for the first time since October. Still, the stock could be staring down
resistance around the $11 level, which has given the shares fits in 2016. Plus, peak open interest resides at P's June 11 call, which could reinforce the level as a short-term ceiling.

P Daily Chart May 17

In the options pits, P traders have been generally optimistic of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day call/put volume ratio of 4.16 sits higher than 81% of the past year's readings.

And it could be an attractive time to pick up short-term options on the stock, as P's Schaeffer's Volatility Index (SVI) of 59% sits in the low 12th percentile of its annual range. In other words, the options market is pricing in low volatility expectations at the moment.

Elsewhere, however, P seems to be surrounded by bearish sentiment. Of the 26 analysts following the stock, 16 rate it a lukewarm "hold." And short interest on the security jumped by 26% during the last two reporting periods, now representing more than 22% of Pandora Media Inc's (NYSE:P) available float. At the stock's typical pace of trading, it would take more than a week to buy back all those shares. In fact, this high level of short interest suggests that some recent call buyers may in fact be short sellers in disguise, using protective calls to hedge against upside risk.

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