After plunging from $59 per share to touch $40.06 per share in the last five days, energy drink maker Monster Beverage Corp. (MNST) is rallying Wednesday by more than 13 percent to pace the S&P 500 gainers in early trading.
Shares of Monster have come under pressure as reports surfaced that a lawsuit has been filed and the U.S. Food and Drug Administration was investigating the company pertaining to five deaths in the last year that were allegedly linked to its drinks.
One of the lawsuits filed against Monster, the top energy drink seller in the States by sales volume, was filed in California by the parents of Anais Fournier, a 14-year-old girl with a heart condition, who died after drinking two cans of the namesake energy drink in a span of 24 hours before her death. The lawsuit states the cause of Fournier’s death as “cardiac arrhythmia due to caffeine toxicity.” Corona, California-based Monster defended that safety of its beverages on Tuesday; stating that one 24-ounce can of Monster Energy Drink contains less caffeine than a 16-ounce cup of coffee.
“Over the past 16 years Monster has sold more than 8 billion energy drinks, which have been safely consumed worldwide,” Monster said in an email statement sent through Evan Pondel, an outside spokesman of the company. “Monster does not believe that its beverages are in any way responsible for the death of Ms. Fournier. Monster is unaware of any fatality anywhere that has been caused by its drinks.”
The energy drink market has been deeply scrutinized recently related to safety and marketing. Notably, Illinois Senator Dick Durbin (D), has asked the FDA to consider caffeine limits on energy drinks, citing an stark increase in emergency room visits across 2005 to 2009 involving consumption of the drinks. Currently, more than 13,000 ER visits each year involve energy drinks, with some of those cases involving a cocktail of drugs or alcohol as well. The FDA has said that they are in the midst of finalizing a new version of their guidelines on energy drinks.
Caffeinated energy drinks by Monster and competitors such as Red Bull, AMP, Rockstar and Full Throttle do not fall under guidelines of the FDA because they are often sold as dietary supplements, although the regulatory agency does put limitations on the amount of caffeine that can be in soft drinks.
Monster sold about $1.6 billion worth of its energy drinks in 2011. Beverage Digest sales that U.S. sales of energy drinks rose 17 percent in 2011 to $9 billion and could top $10 billion this year.
Coupling the nosedive these past few days with a downtrend that began in June, Monster has eliminated all of its gains it had posted in 2012.
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