Trading in options to buy shares of Harley-Davidson Inc. surged to a record on speculation that the biggest U.S. motorcycle maker may be acquired by Honda Motor Co., the world's largest maker of motorcycles.
A combined Harley-Davidson and Honda would command as much as 60 percent of the U.S. large motorcycle market, Tim Conder, an analyst with A.G. Edwards & Sons in St. Louis, said in a research note today.
The number of call options traded jumped to 49,848 contracts, an all-time high, as of 4 p.m. in New York, according to data compiled by Bloomberg. Volume hadn't exceeded 25,000 contracts since October 2005. The most active call, which gives investors the right to purchase Harley-Davidson shares at $70 by July 21, rose sevenfold in price to 35 cents. Earlier, it jumped 10-fold.
``There are rumors of a potential takeover,'' said Frederic Ruffy, an options analyst at Redwood City, California-based Optionetics.com. ``Investors think it's credible. They expect an announcement in the short term and a big move in the stock.''
Conder called the speculation ``false'' because an offer from Honda may not survive U.S. Federal Trade Commission scrutiny and a merger might ``alienate U.S. customers.'' The analyst has a ``hold'' rating on Harley-Davidson shares.
Bob Klein, a spokesman for Milwaukee-based Harley-Davidson, declined to comment. Honda spokesman Jon Seidel didn't immediately return a voice message seeking comment.
The company's shares rose the most since October, adding 4 percent to $62.55 in New York Stock Exchange composite trading. They touched $63.99 earlier.
Traders ``are looking to get as much leverage as possible'' by buying contracts that expire next month -- the July calls --at a so-called strike price that's more than $7 higher than Harley- Davidson's share price, Ruffy said. ``That's a sign they expect something soon because it would take a major announcement to push the stock up to $70.''