The Strategist

Suspicious transactions before purchase of LinkedIn brought $ 2 million to traders

06/14/2016 - 15:55

A suspicious activity on the exchange market has been observed on the eve of Microsoft’s announcement on purchase of LinkedIn. In particular, purchase of LinkedIn’s options brought $ 2 million to traders.

Nan Palmero via flickr
Nan Palmero via flickr
That there were no rumors about the imminent acquisition of LinkedIn, yet 621 option to buy LinkedIn’s shares at $ 160 apiece were purchased on Friday in the course of trading on the NASDAQ stock exchange (before, maximum number of contracts for the purchase of such options was 121) writes Fortune.

According to Bloomberg, total sum of the options’ purchase amounted to $ 135 thousand. After it became known that Microsoft buys LinkedIn for $ 26.2 billion, acquisition price of the options exceeded $ 2 million. Thus, profit for less than one trading day was about $ 1.9 million.

In addition, as noted by the Fortune, brokers purchased 300 options to buy LinkedIn’s shares for $ 175; all of them were bought up five minutes before the close of trading on Friday, June 10. By Monday, value of these options has risen from $ 25 thousand up to $ 569 thousand (2176%).

According to a trader, who commented on Fortune’s observations, most likely, it is not an institutional investor but rather an individual trader.

As noted by Fortune, the transactions closed on the eve of Microsoft’s announcement were not the only suspicious transactions associated with the company. 2502 expiring in November options on LinkedIn were acquired on May 31 for $ 180 each (or $ 53 higher than the company's shares traded at that time). These options have now risen from $ 835 thousand up to $ 3.5 million.

Previously, Microsoft announced purchase of social network for business communication LinkedIn for $ 26.2 billion. Microsoft will pay $ 196 per share, that is, more than half LinkedIn’s market price. The deal will be closed in 2016.

Microsoft’s CEO Satya Nadella has assured that the merger will let the social network "retain its unique brand culture and independence", and Jeff Weiner will remain as general director of LinkedIn.

"LinkedIn created a tremendous business, focused on establishing communication between professionals around the world. Together, we can accelerate growth of LinkedIn, Microsoft Office 365 and Dynamics, because we want to empower each individual and every company on the planet." - Said Satya Nadella.

LinkedIn’s purchase became the biggest deal of current chief executive Satya Nadella, who became Microsoft’s CEO in 2014. $ 8.5 billion-worth acquisition of Skype in May 2011 occupies the second place in the shopping list of the IT giant.

During the IPO in 2011, LinkedIn and its shareholders attracted $ 352.8 million, having placed 7.84 million shares. On the first day of trading, the quotes had increased by 91%. After that, well-known venture investor and LinkedIn’s minority shareholder Peter Thiel accused the IPO’s organizers in that they had underestimated the company.

Fueled by the news, cost of LinkedIn’s securities has risen by more than 48%. Microsoft’s shares, on the other hand, fell by 2.7% after the announcement. Moody's Investors Service put Microsoft’s «Aaa» level rating in the list to be reviewed for a fall because of the risk associated with the social network’s purchase. The rating may be lowered by one notch. Now there are only 3 companies rated "Aaa" in Moody's list.

"Financing of the transaction with the help of debt would approximately twice increase ratio of Microsoft’s total debt to EBITDA ", - said Moody's analyst Richard Lane.