Harley Revs Up on Dubious Buyout Speculation

Shares of Harley Davidson rose as much as 6.4% to $63.99 Friday, closing up 4% at $62.55, on speculation of a buyout by Honda Motor Co. Call options soared, led by out-of-the-money July $70 calls (+600% to $0.35/contract and an intra-day high of $0.50). Despite the bullish reaction, analysts were mostly skeptical. Analyst Tim Conder of A.G. Edwards & Sons discounted the speculation because of expected FTC scrutiny of the combined entity's approx. 60% share of the U.S. large motorcycle market. Conder also said a merger might "alienate U.S. customers." He added the rumor could have been a quarter-end attempt "to squeeze shorts and raise the stock." Options trading volume was 14x its daily average and set a new record. Among options traders, Jon Najarian of optionMONSTER.com was most skeptical, saying the option activity seemed suspicious, "not takeover suspicious, but plant-a-rumor suspicious." A Harley spokesman declined to comment and American Honda Motor Co. didn't return a request for comment.

Sources: Associated Press, Bloomberg, Reuters
Commentary: Motorcycle Stocks: Are They A Good Ride? • Harley Shares Zoom Forward On Earnings and Revenue Beat • Disturbing Trends at Harley-Davidson: Why It's Time to Sell
Stocks/ETFs to watch: Harley-Davidson, Inc. (HOG), Honda Motor Co. (HMC). Competitors: Polaris Industries Inc. (PII)

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