During the premarket session on Thursday, shares of Sodastream International Ltd (NASDAQ:SODA) traded higher by 26%, a price over $87. The gains were in response to a report that PepsiCo, Inc. (NYSE:PEP) was looking to buy the at-home soda maker. This marked the second day in a row that these rumors were being spread, although Wednesday it was The Coca-Cola Company (NYSE:KO) reportedly looking to buy SodaStream.
Check Your Sources
It was quite amusing to watch Sodastream International Ltd (NASDAQ:SODA) in the premarket hours. First, when it was trading higher by 26%, there was reportedly a $95 buyout in the process. Then, Sodastream International Ltd (NASDAQ:SODA)’s gains fell to 14% when PepsiCo, Inc. (NYSE:PEP) CEO Indra Nooyi cites it was the “first time” that she’d heard the notion. Finally, SodaStream’s gains slipped to just 6% when Nooyi took her statements one step further on CNBC by saying it was “totally and completely untrue.”
The moral of this story is to check your sources before buying a stock on any takeover rumor. Granted, Sodastream International Ltd (NASDAQ:SODA) is still higher by 5% on Thursday, and there was an actual story in Calcalist financial newspaper referencing “rumors” that Sodastream International Ltd (NASDAQ:SODA) “could” be bought for as high as $95. Thus, not even Calcalist was taking credit for this story.
Where Did This Come From?
So where in the world did these rumors originate? Looking back, the very first Sodastream International Ltd (NASDAQ:SODA) acquisition rumor of the week was on Wednesday morning and involved The Coca-Cola Company (NYSE:KO). However, the basis of the PepsiCo, Inc. (NYSE:PEP) rumor was just like that of The Coca-Cola Company (NYSE:KO). Thus, it seems logical that Calcalist built a report on the early rumors that were circulating throughout Wall Street – but changed the name of the acquirer.
The first rumor originated on Twitter by CalibratedConfidence, which can be seen by clicking here. The tweet reads, “unconfirmed rumor, $SODA soda stream bid from The Coca-Cola Company (NYSE:KO) somewhere around $100.”
Now, does that sound like anything of any substance? From what I can tell, CalibratedConfidence is a website, a blog, of sorts. However, with it being the first mention, with it referenced by Seeking Alpha’s market currents, and without a source being mentioned, it does seem to be the source of the rumor that spread rapidly. With nearly 35,000 tweets, CalibratedConfidence is quite active on Twitter – but this tweet in particular got noticed.
A Lesson Learned
I suppose the moral of the day is to check your references and to check the source of your news. In the end, those who responded quickly to the report were left with very significant losses once the market opened. In fact, with SODA’s gains occurring in the first hour of the day, it’s most likely that a lot of people were hurt from this rumor turned article.
Personally, I think The Coca-Cola Company (NYSE:KO) or PepsiCo, Inc. (NYSE:PEP) would be wise to purchase SodaStream. The company has a business with rapid growth, one that Coca-Cola or PepsiCo, Inc. (NYSE:PEP) do not have, along with a business that is now protected by patents. Therefore, it makes sense that SodaStream would be desirable as an acquisition target. However, at this point, it is not, and there are no confirmed sources to suggest that either The Coca-Cola Company (NYSE:KO) or PepsiCo, Inc. (NYSE:PEP) is looking to acquire the company. At this point, it looks more like wishful thinking.
Brian Nichols is long SodaStream. The Motley Fool recommends Coca-Cola, PepsiCo, and SodaStream. The Motley Fool owns shares of PepsiCo and SodaStream. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Where Did This Stock-Moving Rumor Come From? originally appeared on Fool.com is written by Brian Nichols.
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