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A tweet from activist investor Carl Icahn about Apple intrigued Wall Street and created frenetic activity in options of Nuance Communications based on a rumor of a possible takeover. Icahn tweeted, ” Tomorrow, we’ll be sending an open letter to Tim Cook (Apple’s CEO). Believe it will be interesting.” Options of Nuance Communications, a company in which Icahn owns a 19% stake, traded at a volume that was 5.5 times higher. It was noted that prior to the tweet, around 2:30 pm, there were 33 options contracts, and the number jumped to an astounding 7, 126 post-tweet. What Icahn asked of Tim Cook was a massive tender offer, not an acquisition.
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Mike Khouw of Dash Financial remarked to CNBC that this demonstrates the power of Twitter to drive up stocks, and added, “Basically, traders expect Nuance to be up sharply in the next week and a half.”
The irony is that Icahn has stated forcefully in the past that he does not intend to pressure a buyout of Nuance by Apple. According to CNBC, he wrote such a deal, “is something I would never micromanage and never think of telling Apple CEO Tim Cook.”
Perhaps Wall Street thinks Icahn is bluffing? In any case, given that the stock is down for the year, it wouldn’t be a good idea for Nuance and its shareholders, as John Bright of Avondale Partners commented, ” If I had a long position in Nuance, I don’t know that I would want to put it up for sale at a low watermark, particularly if I believed in the fundamental value of the company.”
Nonetheless, rumors, rather than common sense, are often a more powerful fuel for stocks.
