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 U.S. Food and Drug Administration said on Monday that it was 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 Corp 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."
Monster said in a statement on Tuesday that it was "saddened by the untimely passing of Anais Fournier." But, it said, it does not believe that its products were in any way responsible for her death, and it intends to vigorously defend the lawsuit.
"Tens of billions of energy drinks have been sold and safely consumed worldwide for approximately 25 years, including more than 8 billion cans of Monster Energy that have been sold and safely consumed in the United States and around the world since 2002," Monster said in the statement.
"The company monitors consumer communications it receives, is unaware of any fatality anywhere that has been caused by its products, and has never before been the subject of any lawsuit of this nature."
Senator Richard Blumenthal, a Democrat from Connecticut, said increased regulatory action could 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 Fournier's family, 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 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.
(Reporting by Dan Levine in San Francisco and Siddharth Cavale in Bangalore; Additional reporting by Karen Freifeld in New York; Editing by Sreejiraj Eluvangal)