Starbucks and Teavana: Should Investors Be Worried?

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Glaucus Research Group has a score to settle with Teavana Holdings (NYSE:TEA). At least, it has shorts to cover on the stock that surged 52 percent on news that Starbucks (NASDAQ:SBUX) would be folding it into its growing portfolio of tea offerings.Teavana

Glaucus Research Group wrote a vehement and scathing report about Teavana claiming that 100 percent of tea samples tested contained pesticides, “many of which are classified by the EPA as Possible Human Carcinogens.” While minimum levels of certain pesticides are allowable by food regulations, the report attacks Teavana’s own claims that its teas are pesticide free.

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CHEAT SHEET Analysis: Catalysts Can Move a Company’s Stock

One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’s stock. In Teavana’s case, the acquisition announcement caused the stock price to surge 52 percent, and Glaucus Research is clearly hoping to trigger a sell off with its report.

Health concerns related to a company’s product have catalyzed huge “fear-based” swings in stock prices, as seen in October with Monster Beverage Corporation (NASDAQ:MNST) when shares tumbled nearly 30 percent in five trading days.

Will This Report Turn Investor Sentiment on the Stock Around?

Many investors raised an inquisitive eyebrow when Starbucks first announced the $620 million all-cash acquisition. Teavana’s stock of course shot up instantly, pushing just 5 cents shy of the $15.50 per-share Starbucks said it would acquire the company for. Starbucks on the other hand lost about 3.7 percent in the two days surrounding the deal.

Investors puzzled primarily over two aspects of the arrangement. Fist, Starbucks already entered the tea game with Tazo tea. Second, Teavana had clearly been struggling, with shares tumbling over 42 percent this year to date before the deal was announced. And now, we’re left to wonder whether or not Glaucus’s findings represent a threat to Teavana’s stock…

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