Citron Research on Green Mountain Coffee Roasters Inc. (NYSE:GMCR), Sodastream International Ltd (NASDAQ:SODA) and The Coca-Cola Company (NYSE:KO).
After a year which promised hyper-growth, but delivered somewhat less than spectacular earnings, Sodastream International Ltd (NASDAQ:SODA) ended trading yesterday at a 52 week low — but now everything has changed.
The news of the day in today’s market is the 10% investment of Coca Cola in Green Mountain Coffee, with the goal of establishing a definitive market for single serve cold beverages. After hours, the market reacted as though it was SODA’s “Uh-Oh” moment … But really?Source: SodaStream
Citron discusses the principle that every short seller needs to understand and respect:
The thin line between competition and proof of concept
While Citron does not hold itself out to be a beverage analyst, we think it fair to state that Coca Cola understands this competitive space better than anyone. So what does this mean for SodaStream?
The Perfect Storm
Short-sellers ought to look at yesterday’s news as the perfect storm of bad news. The stock has closed at a 52 week low
Short interest is near its 52 week high. As of Jan 15, 2014, it was 8.7 mm sharesor 42% of the outstanding — that’s 54% of the float.
The story has completely changed — and it will take years to disprove the thesis
It is an understatement to say that Coke vs Pepsi is a pre-eminent corporate rivalry. Every credible news source would call this the greatest corporate rivalry in the history of business.
Every business school in the world uses these two companies as exhibits #1 and #2 when discussing competition.
This is no 3-rounder for flyweights, either; it’s a 15 round heavyweight bout.
Coke has Minute Maid, Pepsi has Tropicana. Coke has Powerade; Pepsi has Gatorade. Coke has Sprite; Pepsi has 7-UP
Coke has Dasani and SmartWater; Pepsi has Aquafina
Coke has Odwalla; Pepsi has Naked Juice … it goes on and on.