Old Takeover Rumor Could Lift Some Overlooked ETFs

The SPDR S&P International Energy Sector ETF (NYSEArca: IPW) is often overlooked among equity-based energy exchange traded funds, so when IPW jumped 2% on Tuesday, anyone paying attention probably assumed IPW’s upside was the result of a broader energy sector bounce.

That was part of the reason, but notable is the fact that IPW rose 2% yesterday on volume that was more than 10 times the daily average, indicating something other than temporary relief from falling oil prices was at play.

Indeed there was. Unusual options activity in BP (NYSE: BP) and Royal Dutch Shell (NYSE: RDS-A) surfaced in recent days on speculation that Shell could again be mulling a takeover of its rival.

“Innterestingly, the weekly 40-strike calls on BP were also well-bought on Monday, with 3,278 contracts changing hands, most of that volume coming 10 minutes before closing. In fact, 848 contracts were purchased in a single block,” according to CNBC.

BP added 2.2% Tuesday on heavy volume. Royal Dutch Shell and BP, Europe’s largest and third-largest oil companies by market value, respectively, are among IPW’s largest holdings. Two classes of Shell shares combine for 18.1% of IPW’s weight while BP is 10.2% of IPW. [Energy ETF Survives BP Pounding]

With BP trading at its lowest levels in two and a half years, takeover talk is not without merit. However, it cannot be ignored that speculation of Shell/BP marriage has enjoyed a lengthy shelf life. Shell was reportedly a suitor for BP in 2004 and the rumor resurfaced in 2007. After BP shares were bludgeoned following the Gulf of Mexico oil spill in 2010, Shell was again reported to be interested in BP. Point is this is an old rumor that is just that: A rumor.