Saying a lot in very few words…

July 7, 2008

Earlier today, Fresenius SE (FRE3:GY) announced that it was buying APP Pharmaceuticals (APPX) for $4.6 billion, or around $23 a share. The deal represented a substantial premium — just shy of 30% — over where APP’s shares closed on Thursday, before the markets closed for the July 4 holiday.

But what’s really interesting is this 8K that the company filed around 2:30 pm on July 2. There’s very few words here — far fewer than I normally like to see when trying to spot these sorts of things in advance. And because the actual agreements weren’t included, it made it even more difficult to distinguish this from a bunch of other similar filings that piled up in my inbox before the holidays. So I didn’t catch this one in advance. But judging by the timing of the filing and the sudden uptick in the company’s stock on Wednesday afternoon, someone seems to have picked up on the filing, or at least used it as a convenient excuse to buy.


But it’s not just the stock that bounced. A short time ago, I spoke with Ryan Dietrick, a senior technical strategist at Schaeffer’s Research who said the options activity late last week looked unusual, given that normal open interest for APPX options had been “very light”. But on Thursday, someone made a pretty bold bet and bought 540 August call options @ 17.50 a share, which Dietrick says likely went for $1.30 to $1.40. Right now, those options are going for $6.30 a share, which makes whomever bought those options on Thursday either very smart or unusually lucky.

So clearly, not everyone was getting an early start to the July 4 holiday!



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