It simply doesn't get any more spivvy than Friday rumors before a long weekend and into a short week where many investors will be on winter break with their children. With MNST scheduled to report earnings a week from today (2/22) and a wall of worry for investors to climb regarding slowing top line and pricing in the U.S., today's speculation of a takeout just reeks of someone saying "get me out!" before the print.
While the timing of such speculation makes us "highly suspect" (I watched "Ratatouille" with my daughter last night), the notion isn't all that absurd (we have mentioned it from time to time). Beverage companies struggle to find growth in today's environment, and MNST is working toward becoming a global growth story. The size of the deal would be more than manageable for any of the multinationals in our coverage.
Having said that, we don't put much faith in this particular rumor given its timing (we have seen this movie more than once, just like "Ratatouille"). People don't want to be short going into a long weekend and the recent HNZ news has likely only made people more jittery regarding potential M&A activity. We are also seeing call buying across multiple strikes as people position themselves for a possible deal or (more likely), buy some protection for their short position.
We think we are going to get a shot at this name lower, and so we are simply going to watch the headlines this weekend.
Have a good long weekend,
HEDGEYE RISK MANAGEMENT, LLC