Coke and Monster: What was That?

The Coca-Cola Company was compelled to release a short statement yesterday denying that it was “at this time, not in dicussionss” to acquire energy-drink maker Monster Beverage Corp.

Monster shares spiked on a report in the Wall Street Journal that Coke was exploring a deal for the company, only to fall back once Coke issued its statement.

It appears the WSJ wants to claim credit both for breaking the story about a possible deal and for killing it.  Its story is littered with unnamed sources (“persons familiar with the matter”), which are usually either disgruntled investment bankers unhappy about missing a fat payday, or anxious executives who were farther out on the limb than their bosses (or the board) realized.

This episode illustrates that there’s a very thin, almost nonexistent, line between rumor and news, and how quickly a deal can be scuppered if a leak occurs.

The careful wording of Coke’s statement and the updated article in the WSJ, in which it reiterates its earlier reporting, suggests there were serious talks between the companies.  That leaves Coke in the awkward position of needing to respond to shareholder concerns about its acquisition criteria, its strategy for growth and its designs for the energy-drink market, where it has been a laggard.

The next earnings call for Coke could be an interesting one.


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