Tribune Stock Trading Under Investigation

The Chicago Board Options Exchange confirmed Friday that it is investigating a flurry of trading activity in Tribune Co. (ticker symbol: TRB) stock and options that took place March 10, three days before the company announced it was buying Times Mirror Co. (TMC).

Tribune announced the $6.5-billion deal Monday, but the Friday before that, about 1.7 million Tribune shares were traded on the New York Stock Exchange, more than double the stock’s average daily volume for the last six months.

The CBOE said 146 options on Tribune stock were traded March 10, as opposed to 23 and 47 the previous two days. Each option contract carries the right to buy or sell 100 shares of stock at a set price by a set date. Traders often use options as a leveraged bet that a particular stock will go up or down.

Tribune stock lost about 17% of its value after the deal was announced. The stock closed Monday at $30.81, compared with $37.19 on March 10. Tribune stock has since rebounded, closing Friday at $37.50. Shares of Times Mirror, which owns the Los Angeles Times, Newsday and other newspapers, soared after the announcement. It closed Friday at a new high of $93.50.

CBOE spokesman David Gray described the review as routine. “It is something that’s done with regard to any merger that takes place,” he said, adding that he did not know how long the review would take.

But the review could lead to a broader investigation of the trading, according to market experts. A pattern of heavy trading might indicate that some people knew in advance about the deal, or were trading based on rumors about it.