If you guys are SOOOOOOO confident of SBUX's due diligence in terms of acquisitions, does it concern you in the least that they, sbux, did not come out right away and say the results of the Glaucus report is completely bogus? Why didn't they say they already ran the same tests and are totally confident of the claims TEA makes about its teas? Why would they let this negative press hang out there and potentially hurt the teavana brand when it is clearly sbux's desire to keep the brand and grow it aggressively? If sbux already ran these tests and is completely comfortable with TEA's claims, then i can't think of one good reason why they would sit back and stay silent. Can you?
Why bring up anything that is bogus and give publicity to it. Starbucks did their DD and this short seller is grasping for straws and it worked but the party is over now. This should still be trading at $14.40 but we get to make extra money since it isn't. So many gifts in arb world lately.
Sentiment: Strong Buy
It is AMAZING to me that people keep using the "sbux did their DD" defense to why this report is "bogus." As I have said several times, I don't know IF this report is bogus or not; it could very well be. BUT, to say sbux already had done the DD before this report came out is TOTALLY WRONG! IF they HAD already did the DD, then they wouldn't have issued the release saying, "Starbucks Assessing Glaucus Report on Teavana for 'Accuracy or Inaccuracy'" right after the report was published. They would have come out saying the claims are bogus. Why is that so hard for you guys/gals to understand?!
So far, the Glaucus report hasn't legs beyond Yahoo Finance and handful of day-trader blogs and websites. I don't drink tea, so I can't comment completely intelligently, but it is my guess that the overlap between the tea drinking market and where the Glaucus report has currency is de minimus. Therefore, the effect of the Glaucus report on TEA's market, at least so far, seems de minimus as well (apparently, according to their claims (many of which I find suspect, but that is a topic for another day), the Glaucus report's author(s), stopped drinking the tea, and that may be the extent of consumer market damage so far).
As a test of this, I spent a good bit of my time last night on TEA's social media outlets; not one mention of pesticides, Glaucus, or any scams that I found. (But, no doubt the next attack vector when report V3 comes this time next week may be those same outlets. Be prepared. A large % trapped short suggests desperation, as the fear-based rhetoric and imagery appears to confirm, as well as the inconsistent dates on lab reports and claims of shipping to Europe via UPS from a store who doesn't ship to Europe via UPS (or at all, according to reports), also suggests).
Why would Starbucks care? If they did, the tests, as the Glaucus report claims, can be done in as little as 48 hours (despite the fact that the redacted lab reports Glaucus shows us show about a 3 week descrepency between the completion dates of the tests and and the detail results, a fact that is both inconsistent with the 48 hour claim, and inconsistent with similar non-redacted lab reports elsewhere on the net that appear to have originated from the same lab, where the completion date and the detail dates are generally spot on or only off by a day or two). Little lie, big lie? I don't know the answer to that, but I do know I just mad a cut and past error when writing this sentence :)
So, if the tests can be done in as little as 48 hours, no doubt someone who cares would have done so by now, and we'd have seen it on one of those blogs (and I am also expecting as another prong of V3 of the attack, an "independent" research firm we've never heard of posting "redacted" lab reports "confirming" the results, while, of course, keeping the "identity of the lab confidential"). Of course, if it were me, and I had this short on, and I had this dirt, I'd totally give the unredacted reports so everyone could confirm with the lab. Anyway, my guess is that no one cares, and that is why we haven't seen it from Starbucks or anyone else or in any media that matters. If not (the fact that you can do it in 48 hours), is that little lie, big lie?
So, maybe Starbucks is doing, has done, will do, the tests. If so, they have no obligation to the short sellers, arbs, or anyone else. Only their shareholders, employees, and customers. From what I can gather, none of those people appear to care about this either.
But, time will tell. Either Glaucus or TEA is wrong. Either I or the shorts are wrong. It always works that way.
But what shorts need for the deal to fail is for _both_ the teas to have unacceptable levels of pesticides (a claim that has yet to be independently verified and published (to my knowledge), despite well in excess of 48 hours passing, and where the source of the original claim raises doubts in several vectors), _and_ if and only if the claim is true, for Starbucks to feel the fact that it has a material effect on the business, and/or is not able to be remedied at a cost reasonably below the putative benefits of acquiring the business, which are estimated to be quite substantial: the "Starbucksing" of tea. This seems like a very tall wall for the shorts to climb, but it is certainly not stopping them from trying. They might even be right. But, its about probabilities, not possibilities.
And, lets not forget that this report coincidently came out just a few days after the Starbucks deal was announced, despite the fact that TEA has been in business for what, 15 years, and no other similar reports (that I could find), exist. What magical timing :)
Hate the new Yahoo message boards so apologies if this is double posted!
But doesn't due diligence really start AFTER they announce the deal? You know, once they have access to confidential financial info etc?
So I'm not surprised that they didn't come out and say they already ran the same tests. But if SBUX has a good DD team they should be doing their own pesticide tests as we speak...
That said I don't get why people seem to equate closing a high % of deals with having a good DD team. I'd argue the exact opposite. Walking away from deals occasionally would suggest they are actually doing enough digging.
Google this phrase and read the Bronte Capital blog article about it. It's about private equity but same logic applies:
"good due diligence is defined by deals"
due diligence is done before the agreement is signed - now it's waiting for shareholder approval (done), anti trust (soon to come) and close.
you don't agree to a deal and then do due diligence. you sign confidentiality agreements and show the books up front so as to set a price.
for all those saying that the TEA brand is tarnished - notice how there's very little press out there about this whole thing. We own stock - so we watch it.
But it's a non issue in the regular press....just the self published glaucus stuff with statements like - we surmise starbukcs will pull out.
i surmise i'm going to win powerball.
Sentiment: Strong Buy
Acquisition of Teavana Holdings
Starbucks has recently announced its biggest acquisition in the form of Teavana Holdings (NYSE: TEA). The company is expecting the takeover to be closed by the end of the year and accretive in the first year itself by roughly $0.01 per share. The global tea market stands at $40 billion and is growing rapidly (at about 10% annually). In my opinion, with the acquisition of Teavana, Starbucks can unlock huge growth opportunities in countries in India and expand its revenue rapidly.
Teavana January put volatility of 54 suggests price movement 11/29 02:36 PM
Teavana (TEA:$14.29,00$0.06,000.42%) January put option implied volatility is at 54; compared to its 26-week average of 60 according to Track Data, suggesting traders are still expecting price movement. Starbucks (SBUX:$51.63,00$0.26,000.51%) confirmed a deal to acquire Teavana (TEA:$14.29,00$0.06,000.42%) for $620M, or $15.50 per share on November 14.