As selling calls is a bearish bet with unlimited downside, the second transaction seems rather risky, as some other venegeful hedge fund manager (oh, there are a few), could easly run TGT's price up causing a lot of pain for the manager. Then again, these are covered calls as Ackman already owns 58.4 million shares of stock and option equivalent shares (purchased stratospherically higher). Bottom line is Ackman must be hurting big time to be playing with such amateur hour parlor tricks as covered call writing (at least it is not split strikes), unless he is merely selling existing calls in which case he must have booked massive losses due to alpha and theta.
The 8-K also carries the following cryptic language:
"Without limiting the generality of the foregoing, the Reporting Persons are currently engaged in discussions with the Issuer regarding the consideration by the Board of Directors of the Issuer of certain candidates proposed by the Reporting Persons as directors of the Issuer."It is also kinda ironic to be nominated to the board of the company you are in effect shorting. Maybe he should have just shorted it out right from the very beginning and by now would have been able to buy it with the proceeds...
By the way, is it not a breach of some fiduciary duty or another to be short (through stock or options) the company you are about to become director of? Just asking... Sphere: Related Content Print this post