The funds that trade on synthetic deal activity

Management, beware. Once a credible takeover rumour hits the trading floors these days, it can gather momentum at frightening speed, even resulting in the sale of a company.

Take a look at Actelion. The Swiss biotech group has been subject to such heavy bid speculation in recent weeks that its shares have risen by 40 per cent since early October.

Yet so far none of the companies mentioned as potential suitors, including Bristol-Myers Squibb and Amgen, has held serious takeover talks with Actelion, or put down an indicative offer.

That did not stop hedge funds from piling into the stock the second the rumours hit their screens.

One serious participant privately said last week that he did not bother to check whether there were any plausible bidders.

A year ago, no risk arbitrageur would have played such a game.

They would have waited for a deal to be announced – or at least some indication that preliminary talks were taking place – assessed the merits of the deal and looked at the chances of the transaction closing before buying shares.

If they were traditional shareholder activists, they would have studied a target company for months before buying a stake and used that as leverage to meet management and push for change, rather than playing the spread on the difference between the share price and takeover price.

The funds playing Actelion, however, are trading on synthetic bid activity, which shows just how desperate they are.

The anticipated recovery in dealmaking has yet to materialise, and with few solid deals to trade on, they are playing rumours and speculation instead.

As the old saying goes, every fund turns activist when they own the stock and nothing is happening.

Having taken positions in Actelion early when no bid is on the table, they need a way out of their trades, and that means pushing for a sale.

If they succeed, this could be the new shape of activism.

If a Swiss biotech company can be a target, then a range of underperforming companies need to plan how to avoid similar treatment.

lina.saigol@ft.com