Endurance Specialty Holding, ENH rocketed up 36.48% today when the Dow Jones News Servicer reported that ENH confirmed that it’s in advanced discussions about a potential strategic transaction with Japan’s Sompo Holdings Inc.
The Nikkei report said the deal would be worth about $6.5 billion.
Bermuda-based Endurance “there can be no assurance that the discussions will lead to a definitive agreement” and said it doesn’t plan to comment further at this time.
What they didn’t say was that Chairman John Charman bought $19.8 million of the moribund stock at the end of May, exercised an additional 160,000 shares at an average strike price of $48.20. Stock exercises deep in the money without a sale or forfeiture of enough stock to the company to offset the capital gain taxes, leaves an investor exposed to taxable gains that could vanish in a fickle market. It’s about as bullish behavior from an insider buying perspective as there is. Mr. Charman also bought $31.1 million of stock in February of this year.
This proves the point. When an insider buys large amounts of stock without an apparent reason, there usually is one. Perhaps a deal never materializes but it is naïve to think that Mr. Charman was just lucky.