GO
Loading...

Options Traders Foresaw Whole Foods Troubles, Says Analyst

Thursday, 12 Jul 2007 | 3:45 PM ET

At this point, most every business observer seems familiar with the anonymous Web antics of Whole Foods Market CEO John Mackey. While corporate-law experts debate the legality of his acts, investors are asking what it all means for the company's value. Andrew Wilkinson, senior market analyst at Interactive Brokers, joined "Power Lunch" to offer the options market's view of Whole Foods.

Betting on Whole Foods
Whole Foods CEO John Mackey's online alter ego has been getting him into trouble. Andrew Wilkinson, Interactive Brokers sr. market analyst, and CNBC's Bill Griffeth discuss what the options market thinks of this.

Wilkinson said the imbroglio, in which Mackey anonymously disparaged rivals on a Yahoo bulletin board, is merely the latest development that has caused market misgivings. For example, the FTC is attempting to block Whole Foods' acquisition of competitor Wild Oats Markets .

"Back in the autumn [of 2006], it looks like options traders positioned themselves correctly for a decline [in Whole Foods' share price] -- which we saw plenty of," said Wilkinson.

He noted that Whole Foods' stock dropped 40% over three months going into the winter.

But the analyst says options traders haven't given up hope on the aggressively expanding organic food chain: "Now, it looks like for the last eight months, there have been more call buyers than put buyers -- and they seem to be positioned for most of the upside, through 40, perhaps as high as 46, 50," he said.

What Was He Thinking?
It's what the Whole Foods CEO did under a fake name that has everyone talking this morning, with CNBC's Brian Shactman

A statement on the Whole Foods Market Web site confirmed that Mackey posted messages on the Yahoo chat forum. Reportedly, the posts disparaged "alternative" supermarket rivals such as Trader Joe's and Wegmans Food Markets. In one post Mackey and even anonymously praised his own haircut.

The messages were posted under the screen name, "Rahodeb," a cryptogram of his wife's name. One particularly sticky aspect of the story: The CEO lambasted the value of competitor Wild Oats Markets -- which his company still seeks to acquire.

Contact

  • Showtimes

    United States
    Monday - Friday 1:00P ET
    Europe
    Monday - Friday 18:00 CET
    Asia Pacific
    Tuesday - Saturday 01:00 SIN/HK
    Australia
    Tuesday - Saturday 03:00 AEST
  • Sue Herera is a founding member of CNBC, helping to launch the network in 1989. She is co-anchor of "Power Lunch."

  • Tyler Mathisen co-anchors CNBC's "Power Lunch." Mathisen also co-anchors "Nightly Business Report produced by CNBC."

Power Pitch

Kenny Polcari