BlackBerry Ltd Options Trades Around Samsung News Scrutinized

 A spike in BlackBerry options trading following the news of potential Samsung talks is now being probed by the SEC

A surge in BlackBerry options trading on Jan. 14 is under investigation by the U.S. Securities and Exchange Commission (SEC). The spike in options trading happened hours before Reuters reported that Samsung Electronics was in talks to buy the Canadian smartphone maker, says Reuters, citing a person familiar with the matter.

Unusual spike in BlackBerry options

One of the trades under SEC scrutiny happened at 12:06 pm on that day. In that trade, options were purchased with the rights to buy 200,000 shares of BlackBerry stock at a strike price of $10 per share, according to the report.

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Shares of the Canadian smartphone maker had closed on Jan. 13 at $9.71, and they surged 30% on the news to close at $12.60 on Jan. 14, which is the highest level in recent years. Call options with an expiry date of Jan. 23 were purchased for 10 cents, however, following the Reuters report, they surged to $2.55. It is, however, not known if the buyer was able to sell the options.

On the same day in the afternoon, Reuters reported that Samsung and BlackBerry were in talks discussion and that the former had offered the Canadian firm $7.5 billion, pricing its stock between $13.35 and $15.49 per share, which was a 38% to 60% premium over BlackBerry’s trading price at the time.

Was the news leaked deliberately?

Later both companies turned down rumors of any such talks, following which BlackBerry shares tumbled. Reuters later released an update on the report saying that the talks were held between advisers rather than company officials.

The SEC is looking into whether the source through which Reuters got the information bought BlackBerry options, says the report. As of now, it appears that Reuters itself is not under any kind of scrutiny. The SEC is also questioning whether or not the rumor was leaked deliberately to push the stock price higher.

In recent times, the SEC and the U.S. Justice Dept. have been tightening norms regarding merger announcements and other market moving news. Such cases require a lot of effort to be prosecuted, and in December, a federal appeals court ruled two insider trading cases as legal, suggesting that buying or selling stocks using inside information is not always illegal.