Shares of Starbucks (NASDAQ: SBUX) were up more than 6% on Friday after Nelson Peltz disclosed a stake of less than 1% in the company.
The Wall Street Journal reports (subscription required) that "John Glass, an analyst at Morgan Stanley, said Mr. Peltz could urge Starbucks to cut spending and use more licensing or franchising in opening locations. The money saved from that could go to buying back shares or a larger dividend for shareholders."
Perhaps. He very well could urge Starbucks to do that -- but take a quick look at the chart for the company that Mr. Peltz is chairman of -- Triarc (NYSE: TRY). The stock closed at $6.69 on Friday, after beginning 2007 at more than $20 per share. And how's the corporate governance over there? One company that engaged in a proxy fight with him blasted him with this:
Triarc received a corporate governance rating of 21.5, exceeding only 21.5% of all companies in the S&P SmallCap 600 and ranking it in the bottom quartile. Separately, Corporate Library gave Triarc an 'F' on overall board effectiveness -- the lowest possible rating.
Most likely Peltz's stake is a nonissue and will lead to no changes. I certainly don't buy that it's a rational reason for the stock to add more than half a billion dollars to its market cap in a single day.
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Reader Comments (Page 1 of 1)
5-18-2008 @ 4:18PM
Michael Schneider said...
There is a good reason to follow Nelson Peltz into Starbucks and that is when he invests in these companies they usually rise (see item on his investment record posted in the Billionaire Watch section- yellow label, top- at http://www.Barrelomoney.com). Starbucks does have a strong brand so it is not surprising to see a big player get in hen the stock has been so beaten down. Starbucks also has some good news so far in their competition with McDonald's as McDonald's seems to be having some problems getting the premium products off the ground. Still, there are few barriers to entry in the coffee house business.
5-19-2008 @ 3:20PM
JM said...
Starbucks is a bargain right now. This Brand will be around for a long time and they have made the changes to get their price back up to the high 20's.
5-19-2008 @ 4:41PM
wily said...
If Peltz can get oil companies to lower the price on gas or if Peltz can get Howard to lower the price on coffee it will help, otherwise forget it. With the high cost of food more people are eating at places like McDonalds and that will translate into more coffee business for them. Between the Sonics and SBUX, Howard's not doing the happy dance.
5-19-2008 @ 5:41PM
Richard said...
Starbucks is priced fairly in today's market place and the quaility of thier product can't be beat. The brand speaks for it's self, the highest quaility coffee in the world with the flavor and aroma to match.