Why SodaStream International Ltd. Stock Popped

Is this meaningful? Or just another movement?

Jeremy Bowman
Jeremy Bowman
Jul 24, 2014 at 6:15PM
Consumer Goods

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of SodaStream International Ltd. (NASDAQ:SODA) were bubbling higher today, gaining as much as 26%, and finishing up 9% on rumors that a buyout of the countertop soda maker was in the works. 

So what: This isn't the first time the stock has jumped on acquisition scuttlebutt as earlier in the year, Starbucks was said to be on its way to taking a 10% stake in the DIY soda machine, though that never materialized. Today, Bloomberg reported that the company was in talks to sell itself to a private-equity firm in a transaction that would value the stock at $40 a share, according to people familiar with the matter.   

Now what: While the $40 price tag would represent a 38% premium on yesterday's closing price, a sale might still be a disappointment to some investors, as the stock had traded higher than $70 last summer and was still higher than $50 before SodaStream released a nightmarish Q4 earnings report. Profits have been minimal since as the company badly misread U.S. demand levels during the holiday season, and is still having inventory problems because of it. Revenue growth has also slowed dramatically as analysts project sales increasing just 6% this quarter. With shares hovering near an all-time low even after today's bounce, the report, if true, seems to be evidence that management believes the company's growth days are over.