Option Writers Newsletter, Tuesday, 04/26/2005 12:39:15 AM ET
Portfolio Activity - AX
HAVING TROUBLE PRINTING?
The controversy surrounding Archipelago Holdings (NYSE:AX) started Sunday afternoon when the Wall Street Journal reported that financier Kenneth Langone was planning to submit a bid to buy the New York Stock Exchange. The news was certainly noteworthy but few traders expected the storm of accusations and innuendo that pervaded Monday's session. Langone, who is chairman of investment firm Invemed Associates, met with a group of high profile investors Monday, supposedly with the intention to ensure that "maximum value" is being delivered to members of the exchange. However, a number of NYSE members, as well as some people familiar with the situation suggested that Langone, who is being sued by state regulators for his role in former NYSE Chief Executive Dick Grasso's alleged excessive compensation, was simply trying to "get back" at the exchange and the Goldman Sachs Group, which represented both merger parties. A synopsis of the day's activities can be found here:
Langone AXs NYSE Merger.
Regardless of the motives for his activity, Langone has certainly thrown a wrench into the planned merger and the uncertainty weighed heavily on shares of AX, which retreated nearly 10% during the session. With all of the issues and concerns that must be overcome before the deal can be consummated, there will likely be additional downside in the stock price. We will monitor AX closely on Tuesday to see if any buying support emerges, hopefully near the current share value. If not, this may be the quickest exit we have ever made in an OW Portfolio position.
Traders who are in the position are urged to have a stop-loss order in place to protect against unexpected downside activity in the issue.