Wednesday, September 1, 2010

Options Already Gave Burger King Away (BKC)

Stock Assault 2.0 - Artificial Intelligence Stock Market Software

Burger King Holdings Inc. (NYSE: BKC) is feeling some joy on fresh buyout rumors that private equity is looking at taking the fast food retailer private.  Keep in mind that Burker King already went private with private equity and has come back to the stock market as recently as 2006.

Joe Kunkle of noted, “I put out a note to clients on 8-25 that unusual call buying seemed to indicate Burger King could be bought out in a consolidating restaurant industry.  On the day more than 26,500 calls traded, more than 10X average with more than 16,000 far out of the money October $20 calls bought at $0.50.  Implied volatility spiked 31% higher on the same day the Company had reported earnings, an event that usually cause implied volatility to fall, so it was obvious that option traders were positioning for a potential takeover.”

Kunkle further noted, “The following day, August 26th, more than 6,900 September $20 calls were bought with shares at $17.25, fairly outlandish lotto ticket type bets without any notable near term catalysts in a weak market environment.”

UPDATE from 7:25 AM EST… As of 9:00 AM EST we have nearly 500,000 shares traded and shares are up 16.5% at $19.17 versus a 52-week range of $16.31 to $22.19.

One question needs to be posed here: If this has already been private under private equity and it came public, what is the goal and the exit strategy that is any different than what management has currently?  What can it do differently from now to take a couple percentage points from McDonald’s?


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