Logic would dictate that there must be a bad time to announce a merger. One of those times might be when a company reports earnings.
So with options activity heavy in rumored partners
, a dose of skepticism may be in order. Even if Wells, a banking giant, wanted to buy Comerica, as was rumored in the options market Friday and again Monday, it probably wouldn't choose to do so the week that Comerica was due to report earnings, one Wall Street pro said.
Indeed, the earnings release itself, rather than any buyout rumor, may be juicing the call options in Comerica. Comerica is scheduled to report quarterly earnings
"How often does news on mergers happen a week before or after earnings? Rarely," said Paul Foster, options specialist with
in Chicago. "It's important not to just mix and match names. Wells Fargo has said they were progressing still on back-office computer systems issues" since Wells Fargo's merger with
Not that that rules out Comerica as a potential
dance partner, since Wells Fargo CEO Richard Kovacevich has been selling shareholders on the idea that the bank should offer a myriad of financial services.
But it probably won't happen this week. Take note of the fact that Comerica has built up a hefty open interest in the October options, particularly the October 55 and 50 calls. Those options expire Friday.
But the stock price has drifted down 1 1/16 to 55 3/8, and October 55 call options slid with it, off 1 1/4 ($125) to 1 1/8 ($112.50); October 60 calls fell 1 ($100) to 1/4 ($25).
Meanwhile, Wells Fargo earned a place in the most-actives list Monday with a trade of 5,000 November 45 calls at a price of 1 ($100), up 1/16 ($6.25). The stock price was up 3/16 to 45 11/16.
Elsewhere in speculationville,
stock and option prices were simmering Friday and Monday on similar musings that Covad might be an interested buyer. However, it doesn't take a brain surgeon to determine that the two
companies boast overlapping communications-networking assets, which could scotch the need for a merger.
Covad stock was up 2 15/16 to 44 3/4, and Northpoint's was up 1 7/16 to 25 3/4. Usually the most active "out-of-the-money" call options -- those trading above the stock price -- would hint at what sort of premium the stock would fetch as part of a buyout, but Northpoint wasn't giving up much information. The October 30 calls rose 5/16 ($31.25) to 1/2 ($50), and the November 30 calls were up 1 5/8 ($162.50) to 2 1/2 ($250).
options-trading rounds out a two-month absence with heavy trading
again, this time in the October and November calls. The stock price was up a buck to 25 7/8, and the October 27 1/2 calls shot up 5/16 to 11/16; the November 30 calls gained 5/16 to 1 9/16, on trading of over 2,400 contracts. (The open interest was a scant 39 contracts.) Intermedia is a telecommunications provider, offering local, long-distance and data service.