Market Overview

Procter & Gamble Sees 'Massive' Volume Following New Peltz Stake

Procter & Gamble Sees 'Massive' Volume Following New Peltz Stake

Trian Fund Management LP took a $3.5 billion stake in Procter & Gamble Co (NYSE: PG) Tuesday night and pushed shares to a two-year peak above $91.5.

It’s the largest position the activist investor has ever taken in a company, and it’s the second time in five years that P&G has been targeted by such an investor. In 2012, Pershing Square Capital Management took a stake to push for the departure of then CEO Robert McDonald. Pershing sold its shares after McDonald left in 2014.

P&G spokesperson Damon Jones told Reuters the company had been unaware of Trian’s position prior to the filing, and the firm’s intention is yet unclear.

The Market’s Surprising Reaction

Trader Dennis Dick called the ensuing market activity “unbelievable.”

“This is Procter & Gamble,” Dick said on Benzinga’s Pre-Market Prep morning show. “What are they going to sell? I just can’t believe you’re going to tack on $3 or $4 just because Peltz took a stake in it. It doesn’t make sense.”

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He said the activity merited maybe a $1 boost.

“They’re going to tack on $10 billion in market cap because [Trian Founder Nelson] Peltz took a $3 billion position?” he said. “This market, man, trying to figure it out logically sometimes is nearly impossible.”

While the buy was big for Peltz, Dick said the percentage of ownership is fairly insignificant.

The firm essentially bought 1.56 percent of the $225 billion market-cap company.

But investors reacted so forcefully that the trader suspected news along the lines of a takeover.

“I’m seeing the Peltz headline, but I’m like it’s gotta be something else,” he said. “They must have increased their dividend, or must be something with the company — nothing. It was all just on that new position, which isn’t even sizeable, just one percent of the company, guys. That seems crazy.”

P&G generally trades with daily volume averaging 8 million, but Dick said hundreds of thousands of shares traded Tuesday night, and he speculated that 13Fs were the cause.

“They’re chasing so much with these 13Fs because these are just closed over the last 45 days,” he said. “Some of these positions could’ve been bought 45 days ago.”

The stock seemed to have hit its peak and has waned in pre-market trading. With 2 billion shares outstanding, shares are trading around $87.80.

Image Credit: By Jere Keys from San Francisco, USA - Downtown CincinnatiUploaded by xnatedawgx, CC BY 2.0, via Wikimedia Commons


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