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Is St. Jude A Lost Cause?

Summary

After Carson Block's short call against St. Jude Medical, the FT's Lex column took the other side, saying Abbott's pending acquisition of St. Jude provided a cushion for longs.

Portfolio Armor's gauge of option market sentiment suggests that may not be the case. In most cases, stocks set to be acquired are extremely cheap to hedge.

That wasn't the case for St. Jude Medical on Friday, as we show here.

Hey Jude, don't make it bad - John Lennon and Paul McCartney

Lex Says Don't Have A Heart Attack If You're Long St. Jude

You know from Seeking Alpha news that Muddy Waters, the firm led by short seller Carson Block (pictured below), has claimed that St. Jude Medical's (NYSE:STJ) implantable cardiac devices are vulnerable to hackers, and that St. Jude has refuted that claim. So is St. Jude, the company named after the patron saint of lost causes, itself a lost cause? Over the weekend, the Financial Times' Lex column suggested otherwise (free to read with FT registration) -- Muddy Waters-St Jude: heart attack.

After noting that only one stock Muddy Waters has shorted over the last three years is up in value since, Proofpoint, Inc (NASDAQ:PFPT), Lex argues that the deal for Abbott Labs (NYSE:ABT) to buy St. Jude makes it a tough short:

The main cushion, though, is that there is an agreed deal in place for Abbott Laboratories to buy St Jude for about $84 a share, or $24bn.

Such a deal would be difficult to unwind.

Lex suggests that the dip in St. Jude's price...


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