Call Buyers Active In GlaxoSmithKline plc (ADR)(NYSE:GSK)

GlaxoSmithKline plc (ADR)(NYSE:GSK) is one the U.K. stocks that have hardly fetched any attention of options traders. However, on Friday’s trading session, the call buyers are seen making position in company’s stock. The volume in GSK contracts jumped to the record level since 2007, with traders willing to pay higher premiums for bullish options compared to bearish ones. The increased trading activity in company’s stock is largely due to ongoing rumors of GlaxoSmithKline merger with Pfizer Inc. (NYSE:PFE).

The buzz

Traders rushed to make positions in GlaxoSmithKline stock as analysts termed the company as a strong potential acquisition target for Pfizer. The deal buzz is making experts believe that company will bend down to growing demand to shake up management. Kari Olsen who is a sales trader at Tavira Monaco Sam said that the buzz is there is if the Chief Executive resigns, the GSK share price can surge as much as 10%. The move will make the people believe that the company will commence restructuring process and sell some assets.

Options figure

As per the report, on an average 800 GlaxoSmithKline options changed hands each day in May. It is 17% more than the average traded GSK options in April. It is the highest volume recorded in the past two years. The stock has declined 11% since last month’s high. The major problem seen with the company is revenue growth.

The major problem

The CEO Andrew Witty is finding it extremely tough to revive revenue growth. U.S sales have been disappointing and investors have blamed the company’s drug pipeline for the dismal performance. Moreover, company’s overall performance was adversely affected by a bribery scandal in China that forced GlaxoSmithKline plc (ADR)(NYSE:GSK) to pay a fine of $455 Million. The Company’s Chairman intends to retain Witty, but investors’ response to rumors indicates the exact opposite. Even the experts believe that a takeover can boost the shares.

Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.

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