Investors lost some of their thirst for South L.A.-based soda maker Reed’s Inc. in recent weeks, but new Chief Executive Val Stalowir said he has a turnaround plan to make the 28-year-old company profitable.
The $23.8 million public company’s share price dove almost 30 percent to $1.65 from $2.35 on July 14 after the company announced that it had entered into a stock warrant exercise agreement. The deal allowed investors to buy 1.9 million shares of stock at a fixed price of $1.50 a share, which raised $1.6 million for Reed’s.
Shares were trading at $1.60 at the close of markets on July 26.
Stalowir, who started his position July 5, said the company needed the short-term cash for sales and marketing. He added that a more complete funding plan would be announced in coming weeks as a new board and management team take over the company, which reported a loss of more than $5 million for the year ended Dec. 31.
“It’s a great brand that’s been around forever,” he said last week. “Now we simply make sure that everything that is around the product – packaging, promotion, social media – is as good as what’s inside.”
Maxim Group’s Anthony Vendetti, one of few analysts covering the stock, gave it a “buy” rating July 26 despite the market’s reaction to the announcement about the warrant exercise agreement.
Vendetti didn’t respond to requests for comment.
Chris Reed started the company in 1989, making Reed’s signature ginger brew in his apartment. The company went public in 2006, but has yet to turn a profit since that year.
The New York Stock Exchange notified the company in June of last year that it was in danger of being delisted after five years of net losses. A group of shareholders, called the Committee to Rescue Reed’s, organized soon after, threatening a proxy war. In October, the company announced that it was nominating John Bello, the founder and former chief executive of South Beach Beverage Co., to take over as chairman from Reed.
Then Reed stepped down as chief executive in April to become the chief innovation officer, leaving the company without a permanent CEO until Stalowir’s arrival.
Reed’s is following larger soda makers, including Coca-Cola Co. and Pepsico Inc., in pursuing healthier alternatives.
Reed, who is still on the board, is heading up the charge to create versions of the company’s Virgil’s and Reed’s soda lines with natural sweeteners, Stalowir said.
“Once we start delivering on our promises to consumers and retailers and shareholders, then I believe that our stock will start reflecting our progress,” he said.
– Caroline Anderson
