Eddie Lampert'sname is thrown around a lot these days whenever speculation of a buyout in the retail sector comes to the front of the rumor mill. Today, his name is once again surfacing but this time his Sears Holdings is being linked to rumors of a buyout of grocer Safeway, not a Macy's LBO.
One reason? There is a lot of abnormal activity in the options market around SWY. According to Jon Najarian of Options Monster, there is unusual buying activity happening around Safeway today. He says option implied volatility has spiked to 35 in August calls, "an indication that buying has overcome the sellers and they are demanding more premium to protect their sales. Safeway traded just 375 calls yesterday and averaged just 1,737 calls per day in June, so today's 12,500 contract surge on the call side is very interesting and very quickly moved SWY to the top of the rumor heap."
In the equity market, SWY shares are trading up almost 5% so far today and SHLD share are down more than 1%.
Does this buyout make sense or is this another 'pump and dump' rumor that someone is feeding into the marketplace? The rumor mill has been churning out stories these days. Just to compare for you: Macy's department stores has seen a lot of interest and speculation regarding the possibility of it being an LBO target. Meanwhile, the WWD reported today that private equity firm KKR retained Goldman Sachs to help broker at $24 billion dollar buyout of the department store giant Macy's.
According to Najarian, Macy's options are split in trading today and there is no unusual level of volume. You would expect to see the type of crazed, panicked buying of options that typically precedes a takeover if one were truly coming down the pike. Of course Macy's stock is trading up on the rumors--which shows the masses may be buying the rumor--but based on the options market, it is hard to read if insiders know anything substantive on the buyout front.
So, how likely is a Safeway or Macy's buyout? Email me and tell me what you think: firstname.lastname@example.org.
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