Every deal worth a headline these days is inevitably followed by the discovery of unusual options activity. In fact, it's become so routine that when news of a deal crosses, all I have to do is pick up the phone, call an options trader, determine how abnormal the trading activity was in the days prior to the deal, and BOOM--I've got a story. Unusual options trading pre-mega deal is definitely not unusual.
The list of examples is mind-blowing: Hilton Hotels ,TXU ,HCA, Harrah's Entertainment ,First Data . I can go on and on. But that's not the point. The point is, what's the common thread of all these deals? The answer: private equity.
Now, hold on. I am accusing no one of wrong doing. But the reality of today's era of LBO free wheeling and dealing is that there are more parties than ever involved in pulling off even one multi-billion dollar deal. There's the consortium of bidders. Each member of the consortium has its own team of lawyers and investment bankers. The seller has its own lawyers and bankers. Then there are the lenders. And among that enormous group of dealmakers, there's bound to be at least one person who simply can't keep a secret.
I talked to Harvey Pitt, former Securities and Exchange Commission Chairman, about this very issue on "Street Signs" last week.