3Com Trades: What Is Wrong With This Picture?

Hewlett-Packard just announced that it has agreed to buy 3Com Corp. for $7.90 per share, or approximately $2.7 billion. Two thoughts:

1. It’s a good thing the SEC is off for Veteran’s Day, or else it would be busy trying to sort through the slew of inside traders. First, 3Com’s stock price has been steadily raising for the past few days — as Dan Frommer points out — for no discernable reason.

Moreover, someone with access to a Bloomberg terminal sent over some charts showing the price and volume for 3Com $5 strike calls. Take a look at the below, and pay specific attention to the the bottom right-hand corner:


See that thick white line that comes out of nowhere? Well, that’s today’s volume. Nearly 4,000, after several weeks below 100. But if HP didn’t announce the deal until market close… [Update: Zero Hedge also noticed]

2. This deal is really a big break for 3Com shareholders (and not just those who cheated).

Remember that the company had agreed to sell itself for just $5.30 per share, or $2.2 billion, in 2007 to Bain Capital Partners and China’s Huawei Technologies Co. That transaction got held up because of U.S. government concerns about Huawei’s involvement.

Also perhaps means that Bain initially struck a smooth deal, considering that 3Com has apparently appreciated more than 22% over two recessionary years…

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