Monster Beverage Drops Intraday on Rumors of Police Investigation
Shares of energy drink maker Monster Beverage (NASDAQ: MNST) spiked sharply lower in the middle of Thursday's session, before rebounding and trading higher. Rumors circulated that police had entered Monster's California headquarters for the purpose of retrieving documents.
Monster later denied the rumor.
Thursday's spike was only a single event in a series of price movements. The company has been an active investor's dream over the last few months.
Monster's sales have steadily grown in previous years, as demand for energy drinks has increased and the company has worked to expand its offerings. Monster shares have seen an equally powerful rally -- trading below $30 per share at the beginning of 2011 to over $60 per share this past spring.
Then, in May, Monster shares exploded higher on widespread speculation that Coca-Cola (NYSE: KO) was set to purchase the company. The move was so rapid that shares of Monster were halted; Coke later denied the acquisition.
The Wall Street Journal reported that large Coke shareholders (Warren Buffett, perhaps?) contacted management to protest the possible buyout. With Coke seemingly out of the picture, Monster shares slumped a bit, but still traded at a relatively high valuation.
But then, something terrible happened. Reports indicated that the FDA was investigating Monster on the possibility that its energy drink had killed five people due to heart complications.
Given that the beverage is highly caffeinated, investors may have concluded that the allegations could prove accurate. At the very least, they might have thought that no one would consider purchasing a company facing such scrutiny. Shares of Monster were pummeled, dropping to near $40 per share.
With the questions surrounding Monster, it is not hard to see how a rumor about police seizing documents could spread.
Nevertheless, shares quickly shook off the speculation. Going into the last hour of trading on Thursday, shares were up over 0.60%.
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