SodaStream Options Signal Drop After Eight-Month Rally: Israel Overnight

Options traders are boosting bets that SodaStream International Ltd. (SODA) shares will fall after an eight-month rally in the Israeli producer of homemade soda machines pushed valuations to seven times the Standard & Poor’s 500 Index.

The ratio of outstanding puts to sell versus calls to buy is near the record 1.27-to-1 level reached on July 8, the highest since they began trading, and up from 0.63 on June 28. Traders are betting the stock will tumble 6 percent to below $70 before next month’s contracts expire in five weeks.

Buying SodaStream at current levels “is somewhat dangerous in a market that’s volatile,” said Michael Yoshikami, chief executive officer and founder of YCMNet Advisors, which manages $1.1 billion in Walnut Creek, California. “It’s hard to see how one can believe this price unless the company will have explosive earnings. They’re just selling a regular product.”

Shares of the Airport City, Israel-based company posted their first weekly decline in a month, falling 1.6 percent last week to $74.44 compared with a 3.1 percent loss for the Bloomberg Israel-US 25 Index. SodaStream, up 269 percent since its Nov. 2 initial public offering on the Nasdaq Stock Market, trades at 108 times reported profit while stocks in the S&P 500 Index (SPX) fetch an average 15 times earnings. The company is the latest among 58 listings from Israel on Nasdaq, the most from any country after the U.S. and China.

Tel Aviv Stocks

“The company doesn’t comment on stock volatility issues,” SodaStream said in an e-mailed message.

The Bloomberg Israel-US 25 Index of the biggest Israeli companies traded in the U.S. dropped 0.6 percent to 604.74 on July 15 as the measure capped its biggest weekly decline since April 22 on concern the global recovery is stalling. The measure is down 3.9 percent this year.

Israel’s benchmark TA-25 Index fell less than 0.1 percent to 1,251.14 at the 4:30 p.m. close in Tel Aviv. The Tel Aviv benchmark measure has lost 5.7 percent this year, or 2.7 percent in dollar terms. The shekel weakened 0.4 percent to 3.4380 per U.S. dollar on July 15.

‘Dangerous’

Cellcom Israel Ltd. (CEL) had the largest weekly tumble in seven months on concern the country’s biggest mobile-phone operator faces increased competition as the government looks to add new players to the industry. Cellcom fell 5.5 percent in New York last week to $26.23, the biggest drop since the five-day period ending Dec. 17. The Tel Aviv-shares sank 2.5 percent last week to 91.70 shekels, or the equivalent of $26.23, and lost 0.9 percent today to 90.90 shekels.

Partner Communications Co., the second-largest mobile operator, retreated 6.7 percent to $14.84 last week. Rosh Ha’ayin-based Partner shares in Israel fell 2.8 percent during that period to 52 shekels, or the equivalent of $15.18 and dropped 0.9 percent to 51.52 shekels today.

Israel’s Ministry of Communications is planning to open up Israel’s 30-billion shekel ($8.74 billion) telecommunications market to competition in order to reduce prices for customers.

“The impact of pricing competition still makes us cautious,” David Kaplan, a Tel Aviv-based analyst at Barclays Plc, wrote in an e-mailed report dated July 15. Kaplan lowered his price estimate on Cellcom shares to 101 shekels from 111 shekels and Partner’s shares to 72 shekels from 80 shekels.

Stolen Car

Ituran Location and Control Ltd. (ITRN), the Azur, Israel-based maker of systems used to locate stolen vehicles, gained 1 percent to $14.13. The shares in Tel Aviv added 0.4 percent to 48.55 shekels.

Ituran began a mobile application that will help Android smart phone users to manage their vehicles and assets directly from their mobile devices, the company said on July 15 in a Business Wire statement.

“Whether your car is stolen, you need to locate your driver or technician, or you are trying to retrieve your asset, you can now do it from anywhere,” Efrat Bogoslavsky, Ituran’s national sales and marketing director, said in the statement.

SodaStream shares are up 36 percent this month, compared with a 0.3 percent drop in the Bloomberg Israel-US 25 Index. The advance is the biggest among 164 companies that had IPOs since SodaStream, according to data compiled by Bloomberg. Companies that sold stock for the first time in the U.S. in the last eight months recorded an average increase of 8.4 percent.

Sales rose 48 percent in the first quarter from the same period last year to $61.75 million as demand for SodaStream’s do-it-yourself appliances that can turn tap water into more than 100 flavors of soda in refillable bottles spread to 4.5 million homes in 41 countries.

‘Sexy Product’

“This company has a very sexy product,” said Josef Schuster, the founder of IPOX Schuster LLC, which purchased SodaStream shares in the IPO. “If you hit a nerve in the U.S. customer market, that’s a huge market. It’s a great concept.”

Open interest for the August $70 puts on SodaStream shares rose to 2,401 contracts as of the last close from zero before July 5, increasing more than every other option on the stock this month. The contracts are on U.S. options exchanges when the underlying shares are non-U.S. companies.

Calls give the right to buy a security for a certain amount, the strike price, by a set date. Puts convey the right to sell. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will rise or fall.

“There are a lot of shorts,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research in Cincinnati. “That can be dangerous with the more illiquid stocks.”

Israel, whose population of 7.7 million is similar to Switzerland’s, is home to the largest number of startup companies per capita in the world.

Stock Rally

SodaStream was among the companies that raised $127 billion globally in IPOs in the fourth quarter of 2010, more than in all of 2009, helped by a stock market rally that lifted the MSCI World Index as much as 86 percent above its March 2009 low. The three-month period ending December 2010 was the busiest quarter ever for new share issuance.

While U.S. companies raised $31.6 billion in initial offerings this year, only six companies went public in Israel, including Carasso Motors Ltd., a wholesale distributer of new and used motor vehicles whose $73.5 million sale on the Tel Aviv Stock Exchange on June 12 was the biggest offering in 2011, according to data compiled by Bloomberg.

Israel’s stock market was upgraded to developed market status by MSCI Inc. in May 2010, the same month the 63-year-old country was accepted to the Organization for Economic Cooperation.

*T Members of the Bloomberg Israel-US 25 Index:

Allot Communications Ltd. Alon Holdings Blue Square Israel Ltd. Cellcom Israel Ltd. Ceragon Networks Ltd. Check Point Software Technologies Ltd. ClickSoftware Technologies Ltd. Elbit Systems Ltd. EZchip Semiconductor Ltd. Fundtech Ltd. Given Imaging Ltd. Internet Gold-Golden Lines Ltd. Ituran Location and Control Ltd. (ITRN) Mellanox Technologies Ltd. Ness Technologies Inc. Nice Systems Ltd. Orbotech Ltd. Partner Communications Company Ltd. Prolor Biotech Inc. Protalix BioTherapeutics Inc. Radware Ltd. Retalix Ltd. SodaStream International Ltd. Syneron Medical Ltd. Teva Pharmaceutical Industries Ltd. Tower Semiconductor Ltd.

To contact the reporter on this story:
Tal Barak Harif in New York at 
tbarak@bloomberg.net

To contact the editor responsible for this story:
David Papadopoulos at 
papadopoulos@bloomberg.net