An unknown Wall Street trader reportedly hit a jackpot worth $5 million after betting on Warner Bros Discovery stock — just hours before news broke that Paramount Skydance is eying a bid for the floundering media giant.
Just after 11 a.m. ET on Thursday, the unidentified investor splashed out nearly $6 million on 100,000 Warner call options — a contract between two parties to exchange an asset at a set price with a fixed period of time – when the company’s shares were trading at $13.10, according to Bloomberg News.
The contracts granted the mystery buyer the right to snap up 10 million shares in Warner Bros, which owns the Trump-bashing, left-wing news network CNN, at $15 a piece, before Dec. 19, the financial news outlet said.
The trader then sold $41 million shares in Warner Bros in an apparent attempt to hedge the options position.
But the stock surged by more than 35% when the Wall Street Journal reported that Paramount Skydance is preparing a bid for Warner Bros.
The price of a Warner Bros share closed at $16.17 on the Nasdaq, an increase of 28% from the opening bell on Thursday.
The report said the potential takeover is being prepped with help from the family of Larry Ellison, whose son David is the chairman and chief executive of Paramount Skydance.
The surge in Warner Bros’ stock price means that the trader’s call options are now known as being “in the money”, so the contracts can now be sold or exercised at any time for a profit.
Data crunched by Bloomberg News estimated that the investor’s paper profit was at least $4 million, but could be as high as $6 million.
Skydance itself merged with Paramount, the owner of CBS, MTV, and Nickelodeon, in a deal that closed on Aug. 7.
