SodaStream shot up on rumors it was an acquisition candidate. Though the rumors were denied, should it be an acquisition target for your portfolio?
Talk about a SODA pop and fizz.
SodaStream briefly popped up to $100 per share today on a newspaper story that Pepsi was making a bid for the home soda machine company. After the story was shot down by executives in both companies, share prices quickly returned to trading in the mid-$70 range.
The article, which appeared in a Tel Aviv paper called “The Calcalist”, said Goldman Sachs was managing negotiations between the two companies that would value Israel-based SodaStream at over $2 billion, or $95 per share.
Indra Nooyi, CEO of Pepsi, quickly denied the story, saying it was “completely untrue”. SodaStream CEO Daniel Birnbaum said, "We do not comment on rumor or speculation.”
SodaStream has long been thought of as a target for a short squeeze. Nearly 7 million shares of the company – about 40% of total shares – are currently being shorted. When a share is shorted, an investor borrows shares and sells them. At some point in time, they are required to buy those shares back and return them to the entity the investor borrowed them from, ideally at a lower price. In a “short squeeze”, not enough shares are in the market for short investors to buy back, causing a run-up in price.
Despite takeover and short squeeze rumors, does SodaStream’s stock have room to bubble up more or is it fizzling out?
We ask Talking Numbers contributors Enis Taner, Global Macro Editor at RiskRersal.com, and Richard Ross, Global Technical Strategist at Auerbach Grayson, to decide if investors should join club SodaStream or if they should keep their money bottled up.
To hear Taner and Ross on where they think SodaStream is headed, watch the video above.