Sometimes stories take a while until they reach critical mass and the market makes an adjustment to reflect the event.
A recent case of this is the Anheuser-Busch Companies, Inc. (NYSE:BUD) takeover bid by Belgian brewer InBev NV. The story isn't over yet, but I've listed some of the news to-date below the post.
(Click images for bigger charts)
It took a long time for this story to fully
develop. The first rumors were just over a year before the real impact
happened. There were small revivals of the story that didn't resonate
through other channels much until a couple weeks before May 23.
In this case, the story had been percolating for quite some time, but
the catalyst looks to have been the options traders. Perhaps their
actions finally gave some credence to the buyout rumors enough for
everyone to take notice and act.
Once the dam broke, it was
pretty much too late. Only one May 23rd story listed below preceded
the spike, and not really by enough to read and then act upon.
What can you do? Track stories as they progress. If you think that there is truth to the story, either it is lent credence by the fact that it just won't go away, or the stories are talking about some new activity that would also support the story, you might think about acting on it. However, once the story is big news, you are probably too late. (Although there is the possibility of a short position on news spikes like this, a topic for another post...) Be sure you look at other outstanding stories for the same company! Most companies have more than one concurrent story.
Unresolved question: What triggered the options buyers to start buying the June call options? A leak, enough momentum gained by the story, or another news source that I'm not able to find?
Update: The story continues: on Wed Jun 11, the story become even more official with InBev making their bid. Anheuser-Busch stock rose to over $62 per share in after-hours trading.
News Timeline:
Feb 15, 2007 The first buyout rumor begins
00:00am Anheuser-Busch está cada vez mais próxima da InBev - Valor Economico (Brazilian Nespaper - Portugese language)
10:16am Anheuser-Busch declines comment on InBev report - Reuters
2:39pm InBev, Anheuser-Busch rise on merger talk - MarketWatch
3:33pm Brewers' shares rise on reported talks - BusinessWeek
Feb 16, 2007
Merger Speculation Sends Anheuser-Busch Shares to Two-Year High - SeekingAlpha
June 7, 2007 Buyout rumor is revived, this time sparked by InBev
00:00 am Fusie InBev en Anheuser-Busch wordt onvermijdelijk - Trends (Belgian Magazine, Dutch language)
10:42 am InBev execs say Anheuser merger inevitable: magazine - Reuters
July 5, 2007 The rumor just won't die out
1:00 pm A Beer Bash for Bud and InBev? - Wall Street Journal
July 23, 2007 Analysts start getting on board with the merger talk
11:56 am Bud-InBev Deal Chorus Grows - Wall Street Journal
July 24, 2007
Citigroup Predicts Merger Of Beer Giants Anheuser-Busch & InBev - SeekingAlpha
October 18, 2007 Beer Merger talk again, just general industry, not about BUD/InBev
Why Consolidation Storm Is Brewing in Beer Industry - Wall Street Journal
Feb 1, 2008 The rumor is revived after months of dormancy
Anheuser-Busch Dances With InBev - Wall Street Journal
April 11, 2008
12:31pm Clues to the Anheuser-Busch Takeover Mystery - Wall Street Journal Deal Blog
April 24, 2008
Anheuser Posts Drop in Net - Wall Street Journal
May 6, 2008 Options rally
Traders Circle Anheuser-Busch As Buyout Speculation Surfaces - Wall Street Journal
May 7, 2008 June call options at $55 strike price become active, no mention of InBev
12:38pm Surely, This Bud Must Be for Somebody - Wall Street Journal
May 8, 2008 People link June call options with InBev buyout speculation
Bud Not for Sale? Market Doubts It - Wall Street Journal
May 22, 2008 Speculation noticed in the Options markets
Takeover Speculation Drives Trade in Frontier Oil, Anheuser - Wall Street Journal
May 23, 2008 Explosion, everyone writes multiple articles about the news.
9:15am InBev May Buy Anheuser-Busch (BUD) - 247wallst.com
9:55am InBev says no comment on Anheuser-Busch bid report - Reuters
10:30am This Bud's for $46 Billion? - Portfolio.com
10:52am 99 Beer Call Options On the Wall... WSJ
11:07am InBev say not commenting on Anheuser bid report - Reuters
11:39am InBev Declines To Comment On Talk Of Imminent Anheuser Offer DJ
12:15pm Cheers, Mate: An Update on InBev and Anheuser-Busch WSJ
12:30pm Stock Rating Reiterations Midday Update: BUD CRN DRQ DJ
1:27pm Anheuser-Busch: Is Resistance Futile? WSJ
2:06pm Anheuser-Busch,RI Beer Company Settle '03 Nightclub Fire Suit DJ
3:03pm Afternoon Reading: Is This Bud for InBev? WSJ
3:19pm InBev Mulls Bid For Rival Anheuser WSJ
... And many, many more, >40 articles for the day.
