NEW YORK ( TheStreet) -- Onyx Pharmaceuticals (ONXX) shareholders started the weekend with a glass of champagne and the indifference of the pretty girl at the dance holding a filled dance card. After Onyx rejected Amgen's (AMGN) bid of $120 a share, a 33% premium above Friday's close, shares opened Monday above $132 Monday.
Investors are betting Amgen thinks Onyx is playing hard to get, and Amgen will return with a sweetener to gain Onyx's fancy. Onyx can play its cards close to the chest as other potential suitors may present alternative offers or drive up Amgen's acquisition costs.
Short sellers are in full panic after Friday. At the last report, over 9% of the float is short. A 51% increase overnight for a $90 stock is a worst-case scenario for shorts coming to life in vivid (mostly red) color. The outsized short interest is also a catalyst pushing the share price so far above the initial $120 offer and a reason why shareholders may wish to consider Steve Miller's "take the money and run" advice.It's a matter of risk vs. reward. The likely upside is $5-$10, with a small outside chance of a bidding war that may drive shares above $140. On the other hand, a buyout takes at least a couple of months when fast-tracked and normally much longer. One news event can send shares below $100 faster than you can say, "I should have taken the money and ran." Another option is to take some money off the table now and hold on to some shares for an even bigger payday. While you're deciding what to do, keep in mind an old Wall Street adage, "bulls make money, bears make money, and pigs get slaughtered." The Street's Jim Cramer says it often to help keep investors from becoming emotional about stocks, and it's terrific advice. For many Onxy's investors, it's words to live by. Another choice is options. Keep in mind that even after an agreement, it still takes months to finalize. Think of a buyout like a home sale. After reaching an accepted offer, you have to wait for closing. In the meantime, shareholders can sell August $135 calls for about $4 each. Four dollars is not a lot of downside protection if a deal can't be made, but if bidding heats up, you're still selling at an effective $139 a share regardless of how much beyond $135 bidding may go. Unless you believe a real offer above $140 is reasonable, you're only risking $1 potential to gain $4 in premiums. At the time of publication the author had no position in any of the stocks mentioned. Follow @RobertWeinstein This article was written by an independent contributor, separate from TheStreet's regular news coverage.