The Wall Street Journal and other media outlets are reporting a large amount of suspicious option trading in advance of the Hilton-buyout by Blackstone Group announced on July 3rd.
Traders booked massive profits in positions on Hilton Hotels Corp. as the stock surged 26% after the company said Blackstone Group will buy it for $47.50 a share.
The fact that many traders were taking profits in positions added as recently as Tuesday, hours before the deal was announced, had some crying foul. “This one stinks of insider trading,” said Steve Sosnick, equity-risk manager at the Timber Hill LLC market-making unit of Interactive Brokers Group.
Before the deal was announced, there was heavy trading in call options and a run-up in Hilton’s stock price, and many traders say that makes it another example of a private-equity buyout that was preceded by suspect trading in the options market. These traders are frustrated by their perception that this spree is going largely ignored by regulators.
It’s like a rash of burglaries in your neighborhood and you can’t get any information and the cops aren’t doing anything,” said Matt Calder, senior trader at Toro Trading LLC, an option market maker.
You don’t have a huge amount of parties who should’ve known about this deal,” Mr. Sosnick said of the Hilton buyout. “Perhaps this is one where enforcement can arise.”
Commentary: Okay, the booking photo of Paris is totally gratuitous but we figured it was one more way to get the SEC’s attention on this “no-brainer” (now we have two reasons to reference the Paris’ photo). Insider trading is running amok – and this is a perfect example. If the SEC snoozes through this one it will be a real shame.
