Simon’s stock tips
DISCOVERY
Price hit by health concerns, CEO’s put options
he Discovery* share price has been under severe pressure, falling by almost twice the extent of the overall market collapse. The one reason is investor concerns about their exposure to medical aid and Vitality. Worries about the medical aid unit are to be expected amid the coronavirus pandemic. Concerns about Vitality relate to expectations that people will stay at home, exercising less and maybe cancelling their subscriptions. But there is another important issue at play here. Discovery CEO Adrian Gore entered a zero-cost collar back in October 2016. This involved a two-legged transaction with the one leg being a series of put options on the Discovery share price. The strike price on these put options is 8 316c and 9 396c per share with 4.3m shares at each price.
