Monster Shares Surge Following “Encouraging” FDA Comments

After weeks of seeing its stock price battered by reports linking consumption of its energy drinks to dozens of hospitalizations and a number of deaths, Monster Beverage Corp. can finally breathe a little easier.

Over the past two days, shares of Monster rose to their highest level in over a month after the U.S. Food and Drug Administration (FDA) indicated that the agency would not be pursuing any immediate action to increase regulation of energy drinks. Buffering the surge was a Goldman Sachs Group Inc. report that called the news an “encouraging” sign.

While not tipping its hand on future regulation of the category, last Friday the FDA issued a response to repeated calls from two U.S. senators asking for greater oversight of energy drinks. The letter stated that the agency would enlist the help of outside advisors to examine the potential risks of energy drinks when consumed by individuals with pre-existing health conditions and “consider taking appropriate action.” However, Goldman Sachs analyst Judy Hong said in an investor note that any potential regulation would be “benign.”

“Our overall impression of the FDA letter would be that, at this point, the FDA has little reason to think energy drinks are unsafe when used in a responsible manner,” Hong said. “To the extent energy drinks are used ‘inappropriately’ the FDA has no jurisdiction to take action against the manufacturer.”