SodaStream (SODA) stock is jumping today after a media report said the company is looking to sell a large stake in SODA stock to a large beverage firm.
This is just the sort of boost SODA stock needed after a prolonged period of weakness. Sodastream stock was off 16% for the year-to-date before the stake-sale news broke. The longer-term view was even worse: SODA shares were down more than 55% from a 52-week high hit nearly a year ago.
Be forewarned that based on the sketchiness of the media report, it’s unclear how long the rally in SODA stock can last — especially since much of the upside appears to be driven by a short squeeze in Sodastream.
An Israeli financial newspaper said SodaStream is in negotiations to sell a 10% to 16% stake at $54 a share — a 33% premium to Tuesday’s closing SODA stock price, Bloomberg reported. That would value SODA stock at $1.1 billion vs. its current market cap of $787 million.
If that’s not hard enough to swallow, the report in Calcalist said possible parties involved in the transaction included a big chunk of the beverage industry. Companies interested in the SODA stock stake according to Calcalist are PepsiCo (PEP), Dr Pepper Snapple Group (DPS) and Starbucks (SBUX).
The deal comes a couple months after Coca-Cola (KO) and Green Mountain Coffee Roasters (GMCR) announced a partnership of their own. Coca-Cola grabbed a 10% stake in GMCR, with the opportunity to up that stake to 16% in the next three years, and will partner with Green Mountain to dish out single-serve soda via a “cold” Keurig.
Calcalist didn’t say how it got the SODA stock information, Bloomberg reported, but that doesn’t mean it’s not true.
And ultimately, that’s immaterial for retail investors anyway.
True or not, SODA stock isn’t worth the trouble for most investors. It will never let you get a good night sleep just based on volatility alone.
Have look at the fortunes made and lost since SODA stock went public in 2010:
SODA stock isn’t anything you want to count on as a buy and hold.
As a quick trade, however? Hey, you might get lucky. Nearly 40% of the SODA stock float was sold short as of the most recent data, according to data from S&P Capital IQ. If the deal turns out to be true, then all that short interest could fuel upside in SODA stock for at least a couple of sessions (including today’s). Based on average volume — which will rise in a squeeze — it would take about six days for the shorts to get out.
SODA stock might — might — be a trade on this unsourced report, but it’s sure not an investment.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.