Monster Beverage Corp. shares sank more than 10 percent for a second straight day on Tuesday as investors expressed concern over potential legal and regulatory fallout from a lawsuit and investigations into five deaths to see if they are linked to the company's namesake energy drink.
The Food and Drug Administration is looking into the deaths, and Monster is being sued by the family of a 14-year old Maryland girl with a heart disorder who died after drinking two cans of Monster Energy drink in a 24-hour period.
Goldman Sachs removed Monster Beverage from its conviction buy list, though it said it did not believe the ultimate legal outcome would be "significantly onerous."
Gabelli & Co. analyst Damian Witkowski said there could be more disclosures on Monster's cans or changes to how it markets its products, but he said this should not hurt business too much. He said he did not think people would stop drinking it because it contains caffeine, adding "People who drink it already know that."
Still, Witkowski said the issue is likely to weigh on the stock until it is resolved. "Stocks don't like uncertainty."
Citigroup analyst Wendy Nicholson lowered her price target on the stock and said the argument for a takeover had "evaporated."
On Monday, Monster said it was "unaware of any fatality anywhere" caused by its drinks, and that it does not believe its drink was "in any way responsible" for the Maryland girl's death. The company did not respond to requests for comment on Tuesday.
Senator Richard Blumenthal, a Democrat from Connecticut, said increased regulatory action c ould follow the investigations.
William Marler, a plaintiff side food liability attorney, said that if only a very small population was ever harmed, the company would have a strong defense that it did not know the risks and could not be held liable for failure to warn consumers, even if the family's lawyers could prove the drink played a role in her death.
According to the lawsuit brought by the family of Anais Fournier, the autopsy showed that her death had been caused by heart rhythm irregularity triggered by caffeine toxicity that put extra stress on her heart valves, which had been damaged by a condition called Ehlers-Danlos syndrome.
Attorneys for the girl's family did not respond to calls for comment.
Monster shares closed down 10.2 percent at $41.08 on Tuesday. Its shares fell more than 14 percent on Monday.
The case in Superior Court of the State of California, County of Riverside is Wendy Crossland and Richard Fournier, individually and as surviving parents of Anais Fournier vs. Monster Beverage Corporation, 1215551.
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