Friday, February 19, 2010

Options Read on Smith International Buyout Talk (SII, SLB)

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The reports today put Smith International Inc. (NYSE: SII) as a company in talks to be acquired by Schlumberger Ltd. (NYSE: SLB).  If this occurs it would be the largest oilfield services giant becoming even larger.  While we have yet to see a formal deal, Smith shares traded over 42 million shares today, almost 8-times normal volume, and closed up 13% at $37.70.  The stock also hit an intraday high of $38.16, marking a new 52-week high that is just a hair under being up 100% from a 52-week low of $18.43.

With any buyout talk, whether confirmed or just rumor, we always look to see what the stock options market is telling us.  The options trading is never very active in Smith, but today’s options trading was nearly as exponential as the stock.

Calls$    Vol.    OpInt
35.00    726    1,149
Puts    Vol.    OpInt
35.00    1,935    110

Call$    Vol.    OpInt.
34.00    523    3,656
35.00    2,497    991
36.00    3,886    1,775
37.00    4,952    13
Puts$    Vol.    OpInt.
33.00    711    177
34.00    3,059    22
35.00    3,646    80
Call$    Vol.    OpInt.
37.00    1,547    1,556
40.00    1,667    188

After a review of the options prices at the close, the implied buyout price would be just short of $39.00.



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These are this Friday’s top day trader alerts and active trader alerts we have seen on the move based upon events.  We have an explanation and added color on each where applicable:

Apollo Group Inc. (NASDAQ: APOL) is trading down sharply after providing preliminary guidance that is short of estimates for Q2.  The company is boosting a share buyback by $500 million, but no one cares.  At 8:37 AM EST we have seen over 260,000 shares trade hands and the stock is down 12% at $54.04.  Keep in mind here that the 52-week trading range is $52.79 to $84.22 so it is close to a 52-week low.

Bank of America Corporation (NYSE: BAC) has several issues to watch today.   First is that the discount rate was raised.  Late yesterday Meredith Whitney called it the “Least Worse” of big banks on the NYSE floor in a CNBC interview.  Last night came reports that the government is reportedly going to sell its warrants.  Shares are down 1.15% at $15.70 on 600,000 shares as of 8:30 AM EST.

Canadian Solar Inc. (NASDAQ: CSIQ) is getting clipped.  The company now expects its gross margin to be in the mid-teens versus guidance that was initially put at the high-teens.  Shares are down 10% at $22.22 on almost 100,000 shares as of 8:40 AM EST.  This one is VERY volatile… the 52-week range is $3.00 to $33.68 and average volume is 2.1 million shares.

Capstone Turbine Corp. (NASDAQ: CPST) announced a proposed stock offering last night via Lazard.  This had been telegraphed before in a recent filing to raise capital, but shares are down 11% at $ 1.10 on 55,000 shares as of 8:30 AM EST.

Dell Inc. (NASDAQ: DELL) saw its fiscal fourth quarter earnings fall 5% to $334 million and EPS dropped 6% to 17%. The company reported that sales rose 11% to $14.9 billion.  Shares were down 3% last night and were down 5% at $13.70 on 1.4 million shares as of 8:40 AM EST.

First Solar, Inc. (NASDAQ: FSLR) is getting drummed this morning, but it seems that the weakness is being used as a buying opportunity by some because shares are up $2.00 from last night’s and this morning’s lows.  Shares are down over 7% at $117.00 on over 50,000 shares as f 8:31 AM EST.

Huntsman Corp. (NYSE: HUN) is trading up this morning after the chemicals company managed to post $0.27 EPS rather than an expected loss, and revenues were roughly $2 billion versus $1.9 billion expected (Thomson Reuters estimates).  At 8:34 AM ESt we have shares up 4.5% at $12.93 on 44,000 shares.

Smith International Inc. (NYSE: SII) is soaring on reports that Schlumberger Ltd. (NYSE: SLB) is talks to acquire the company. Shares were indicated up 20% earlier on the news, but the stock is up about 14% at $38.00 on 450,000 shares as of 8:35 AM EST.

WebMD Health Corp. (NASDAQ: WBMD) is soaring after earnings and after it was raised to Buy at Citigroup.  Shares are up almost 7% at $42.00 on 45,000 shares as of 8:50 AM EST.  This appears to be a 52-week high as the prior range is listed as $19.45 to $40.44.

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FEBRUARY 19, 2010