What happened

Shares of beverage company Celsius Holdings (CELH 20.44%) were up 32.4% in August, according to data provided by S&P Global Market Intelligence. But it wasn't a smooth ride higher for shareholders. At one point, Celsius stock was up over 70% during the month before tumbling around 25% from the top.

Early in August, Celsius stock ran higher after reporting strong earnings for the second quarter of 2020. But later in the month, the stock fell after the company announced a special financing arrangement. 

CELH Chart

CELH data by YCharts.

So what

In Q2, Celsius Holdings' revenue grew 86% year over year to $30 million -- a quarterly record. In the U.S, where the company derives most of its revenue, its products are now available in over 75,000 locations. That's an increase of over 10,000 just since the end of 2019.

As Celsius Holdings continues expanding its network, expect revenue to grow. But the company is also proving the venture is profitable as it scales. It recorded net income of $1.6 million in Q2, up from a net loss of $1.5 million last year.

Why was Q2 particularly impressive for Celsius Holdings? According to management, 20% to 25% of U.S. revenue typically comes from health clubs. Because of COVID-19, health clubs were closed for much of the quarter. This should have caused a problem. However, it turns out Celsius' customers are loyal; they shifted spending from health clubs to online and grocery channels.

Having a loyal base of customers is an encouraging signal as Celsius Holdings expands its distribution footprint. These positive signs helped send the stock higher in August.

A green chalkboard displays a chart where dollar signs keep growing larger as a hand draws an up arrow in white.

Image source: Getty Images.

Now what

On Aug. 20, Celsius Holdings announced private investments of $22 million. The cash allows the company to pay off some bonds that were issued when it acquired Func Food Group Oyj in 2019. Investors don't mind that. What they didn't like was Celsius sold shares to these investors for $15.30 per share. At the time, Celsius stock traded around $26 per share. 

Agreeing to sell your stock at a 40% discount isn't a bullish signal from this small-cap stock's management, or at least that's how investors interpreted it, and the stock sold off after this. But with Celsius expanding in the U.S. and eyeing an international opportunity, $22 million may be a small amount to get upset about in the grand scheme of things.

Investors would be wise to continue watching the growth in distribution channels, growing profitability as the business scales, and the ongoing loyalty of customers. Those will be more important factors over the long term.