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Is Monster Beverage Einhorn's next target?

January 18, 2013: 12:38 PM ET
Investors have been avoiding Monster Beverage due to concerns about lawsuits and regulatory reviews. Now there's talk a prominent hedge fund manager may short the stock.

Investors have been avoiding Monster Beverage due to concerns about lawsuits and regulatory reviews. Now there's talk a prominent hedge fund manager may short the stock.

Shares of Monster Beverage (MNST) sank as much as 8% Friday on chatter that hedge fund manager David Einhorn may soon announce a short position in the energy drink maker.

If Einhorn is going to short Monster, it would not be a huge shock. He has made waves in the past few years for successfully shorting other consumer stocks that some believe were fads, such as Green Mountain Coffee Roasters (GMCR) and Chipotle Mexican Grill (CMG).

Einhorn also caused a big sell-off in Herbalife (HLF) last spring when he asked management critical questions on a conference call. Although it appears that he never shorted the controversial nutritional supplement marketer, leaving that battle for fellow hedgie Bill Ackman.

A spokesperson for Einhorn's firm Greenlight Capital has no comment about the Monster speculation. But traders on StockTwits were salivating about the possibility of another prominent Einhorn short target.

JJSinghSTARR
Talk emerges that Einhorn is short Monster beverage... stock gets insta-crushed $MNST

ldrogen
Glad to see Einhorn may be short $MNST, nothing good about those drinks, seems like a fad too

Still, even if Einhorn is steering clear of Monster, there are other reasons why the stock could come under pressure. The company has been scrutinized lately due to health concerns about its popular beverages, which include lots of caffeine as well as stimulants such as taurine and guarana.

The FDA is investigating Monster and other energy makers and some deaths have been blamed on excessive consumption of energy drinks. A wrongful death suit has also been filed against Monster. To date though, there has been nothing definitive that links any health problems specifically to energy drinks. Monster has vowed to defend itself in court.

With that in mind, some traders think that the stock, which is down more than 40% from its 52-week high,  has been oversold.

Several StockTwits users said the blame lies with consumers for reckless behavior, not Monster and its line of drinks.

JohnEarlBurnett
#EnergyDrink related emergency room visits skyrocket "Main Cause Mixing With Alcohol"http://t.co/CWUi3TYb $MNST #Redbull $$ #NotTheProducts

Brysapp
One day people are going to realize that $MNST / 5 hr energy etc. hospital cases are a result of stupid people, not the products themselves.

ianestepan
I am not a fan of energy drinks - but the FDA just looked at the data and came back w nothing $MNST

Exactly. No links between deaths and energy drinks has been proven. But lawsuits and regulatory reviews are never good news for stocks. Still, one trader thinks that the Monster sell-off could finally lead to the company getting taken over.

BikiniState
$KO Chance to buy with short sighted sellers fearing energy drink issue. $MNST decline = better market share for KO with diverse mix. $SPY

Rumors that Coca-Cola (KO) would want to buy Monster have been around for a while now. Not sure I buy it. But stranger things have happened. Heck, Dell (DELL) might get taken over by private equity firms ... which leads me to my Reader Comments of the Week.

The talk of Dell potentially going private was one of the big stories on Wall Street this week. I'm still a bit skeptical, and used a quote from my beloved Rush to express said doubts. Hedge fund manager Eric Jackson had a couple more.

Just thought of another one! There is trouble in the forest. There is trouble with the PCs. For shareholders want more sales growth and Michael Dell ignores their pleas. Anyway, all this talk of Rush got another Twitter friend to make this very amusing remark about how Geddy Lee, Alex Lifeson and Neil Peart foresaw the Great Recession.

Maybe Rush shorted Lehman Brothers just like Einhorn did?

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Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

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