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Why SpartanNash Soared 30% Today

By Howard Smith – Oct 9, 2020 at 11:38AM

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The food distribution company disclosed a new commercial agreement with Amazon.

What happened

Shares in SpartanNash (SPTN 0.88%) are up more than 30% as of 11:15 a.m. EDT Friday. 

While the food distributor and retailer's business has been strong throughout the COVID-19 pandemic, news of a commercial agreement to issue a warrant for common stock to Amazon (AMZN -0.97%) has generated excitement today. 

So what

In an SEC filing, the company disclosed that under the agreement with Amazon, SpartanNash has issued a warrant to purchase up to 5.4 million shares in the company. The warrant has been issued specifically to NV Investment Holdings LLC, a subsidiary of Amazon.

grocery store produce aisle

Image source: Getty Images.

Amazon, through its subsidiary, will be able to purchase warrant shares for a price of $17.7257 per share, and has until Oct. 7, 2027 to do so. 

Now what

Shares closed at about $17 per share yesterday, but jumped past the warrant price immediately today. The company currently has about 36 million shares outstanding. If Amazon purchases all 5.4 million shares it is entitled to, it will become the company's second largest shareholder, having only slightly fewer shares than investment management company BlackRock

Like most consumer staples businesses, SpartanNash has seen growth throughout the pandemic as people stocked up on groceries and began a more extended habit of cooking at home. The company distributes to grocers, including 155 of its own retail stores, as well as U.S. military commissaries. 

With Amazon's ownership of Whole Foods Market, and the steps it has taken toward new grocery initiatives, investors are betting that there is more to this agreement than just a stake in SpartanNash. Amazon may be looking to add to its grocery assets as well as bring a successful food distributor under its corporate umbrella. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Howard Smith owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Spartan Stores Stock Quote
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