Investors are increasingly betting that Irish drug company Elan won't be sold even after it spins off its cash-hungry drug- development business.
Data compiled by Bloomberg shows that the ratio of outstanding so-called puts to sell US-listed shares in Elan compared with calls to buy the stock rose to 0.67 to one this week, the highest level since September 2008.
Puts to sell enable investors to sell stock in a company at a certain price in the future below its current value in the market. The investors are counting on the company's share price falling in order to make a profit. Investors can also use such a tool to help minimise losses if another position they hold in the stock sours.
Calls to buy give investors the option to buy stock in a company at a specific price and time in the future. They hope the share price on the market will rise, allowing them to exercise their call option to acquire the stock at a lower price and profit on the difference.
The two most-owned recent options on Elan stock were bearish. It currently costs more to buy a put option that pays out if Elan's US shares fall 10pc than it costs to buy a call option that anticipates a 10pc jump in the share price.
There has been speculation that if Elan, as expected, secures shareholder approval to split in two, then the main Elan unit will become a takeover target.
The company announced this month that it will hive off the bulk of its drug-development business into a new publicly-listed entity called Neotope Biosciences.
That will effectively remove significant future research and development cash requirements from Elan's financial pipeline. Elan itself will retain the 50pc stake it has in the successful MS treatment Tysabri, as well as some other assets.
The co-owner of Tysabri is US-based Biogen-Idec. It has first dibs on buying Elan's stake in Tysabri if the Irish company is taken over.
The US company is therefore seen as the most likely candidate for buying Elan.
Elan chief executive Kelly Martin has already said he wouldn't stand in the way of any offer for the company.
Elan said the planned company split had been under discussion for about a year. But it came immediately after disappointing data from trials of what was a potentially ground-breaking Alzheimer's disease treatment were released. Elan holds a 25pc stake in an entity that undertook the research programme.
The Irish drugmaker trades at 8.8 times net assets, compared with a multiple of 3.2 for a measure of healthcare companies in the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
"We currently doubt that Elan will be acquired at these levels," said Olav Zilian, a Geneva-based analyst with Helvea. The stock "is still too expensive", he added.