How Obvious Is It That Someone Knew Celgene Was Going to Be Acquired?

Yesterday, as the stock market was opening the year 2019 on a down note, Celgene was making a move from 63 to 67. The options premiums on all long-dated options were spiking higher. And, there was no news on Revlimid or any other Celgene drug. Nothing.

This morning we awoke to the news that Celgene was taken out by Bristol Myers at a dramatic premium (30% +) to its trading price yesterday.

I am not in the business of making unsubstantiated allegations, but how frigging obvious does it need to be that some folks were trading on inside information here? In this case, one needs only look at the stock's trading pattern yesterday.

And, if there is a winner, then there is a loser. And, in this case, the loser is me. Well, I wasn’t really a loser, but I was considering buying Celgene last week and based on the publicly available information, I saw no reason to view the valuation as compelling versus Gilead or Amgen or Biogen.

The point, however, is that all of us who do not have access to inside information lose when people are able to trade on inside information with impunity.

Raj Rajaratnam may have been the last high profile person to go to jail for trading on inside information, but it is clearly still happening all the time.

Disclosure: The author has no position in Celgene, but is long stocks that are mentioned in the article.