Market research
Jones Soda saw its shares hit the dizzy heights last week following the announcement of a pact with US retail giant Wal-Mart.
//i4.aroq.com/1/jones_2.jpgThe deal is the latest twist in a rollercoaster ride for Jones Soda, which only recently was seeking the rescue of a white knight.
The group's shares leapt by 62% after Jones inked the deal, which it said would expose its products to millions of new customers while boosting its distribution outlets by 10%.
Investors believe the distribution deal is sure to boost the tiny company's fortunes, which have suffered considerably in the last 12 months.
In April, the firm reported losses of US$10.5m for 2009 and sales were down by 28% for the year.
Yet this latest deal with Wal-Mart, coupled with the announcement in April that the company is expanding its sales territories with the creation of jobs, suggests that the firm may pull itself out of the mire - possibly even without outside assistance.
“The promising indicator for Jones Soda is its high short term liquidity position which is evident by a current ratio of 3.41 times as the company maintains current assets 3.41 times more than its current liabilities,” Penny Stock Live said.
However, one internet blogger questioned the amount of profitability Wal-Mart's contract will bring.
“For a company struggling with cash, how will they acquire the funds for any sort of networking capital ramp of a substantial size? They've had distribution deals with Wal-Mart/Target/etc in the past which have fizzled out. Wal-Mart not only drives a hard bargain but they're quick to maximise their shelf space sales,” said TMFRhino.
Another added: “[Jones] said they have a new focus on increasing their margins. I think they have a better product than any I've seen at Wal-Mart. I would much rather buy their drink than a Monster drink or Gatorade any day.
"I just don't see this stock ending up anything under $10 a share, period. In the longer run I expect it to go well over its former high $28. The price is pumped up in anticipation of that fact in my opinion,” said Calidan535.
The Wal-Mart deal, then, has raised a number of questions, namely whether the company feels it can now fight on alone, or whether it is eyeing a higher takeover bid.
Back in March, the industry was sure Reed's would acquire the firm in a share and cash merger deal. Yet the wheels fell off the deal when Jones announced it was in talks with an unnamed rival “third party” over a merger, or even an out-and-out takeover.
The company has maintained that it has several options, such as share offerings, debt refinancing and strategic partnerships, but we’ve been waiting for Jones to come up with something since late 2009.
The firm, known for its quirky flavours, may still be holding out for a partnership deal, and a partnership with Wal-Mart coupled with a high share price may indeed allow the soda maker to command a higher takeover bid.
It will be interesting to see what rabbit Jones pulls out of the hat next.
Sectors: Soft drinks, Water
