Fortress Stock Volume Surged With Options on Day Before Buyout

Trading in the shares and bullish options of Fortress Investment Group LLC jumped to the highest levels in months on Tuesday, just hours before the company’s takeover was announced.

Stock in the New York-based private equity manager rallied 6.5 percent yesterday, the most since April, and volume exceeded 8.5 million shares, almost nine times the 2016 average, data compiled by Bloomberg show. A March option with an exercise price of $6 changed hands 8,328 times, with its open interest quadrupling. Its value surged as much as 388 percent on Wednesday.

All the action came before news broke that SoftBank Group Corp. would buy Fortress for $3.3 billion in cash, sending the shares up another 29 percent Wednesday. Analysts searching for visible catalysts that may have spurred the volume pointed to the company’s earnings announcement expected next week -- though the release of results has rarely driven trading like this in the past.

“Absent that event, the trade would be fishy at best,” said Jim Strugger, head of derivatives at MKM Partners in Stamford, Connecticut. “The timing certainly raises questions.”

As the stock rallied on Tuesday, the volume of bullish Fortress options increased to the highest level since last April. The biggest March $6 call trades were blocks of 1,500, 618 and 382 contracts, changing hands for 40 cents apiece after 2:21 p.m. New York time. Together, the trades were worth $100,000. They surged to as much as $2.05 each on Wednesday, for a potential $412,500 profit. March $6 calls were again among the most traded on Wednesday.

Media representatives for Fortress and SoftBank didn’t respond to calls and e-mails seeking comment on the trading. Judy Burns, a spokeswoman at the Securities and Exchange Commission, declined to comment.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE