Summary

Due to 75% insider ownership, 2.3 million shares short, and ETF ownership, the retail float for FIZZ was less than 6 million shares, as of December 31, 2016.

This thin float combined FIZZ’s strong stock price momentum have caused the parabolic move from $46 in mid January 2017 to $93, on April 20th.

On Friday, we bought a modest number of FIZZ July $75 puts. I issued an instablog alert to my followers. Here is the write up that I promised.

Unequivocally, at $85.50, shares of National Beverage Corp. (NASDAQ:FIZZ) are a classic cult stock that are currently trading at a very bubbly valuation of 38X fiscal year end April 30, 2017 earnings. Moreover, as of Friday’s close, the company sports a market capitalization of $3.981 billion (46.569 million shares x $85.50). Before we get into the weeds as to why FIZZ shares are fundamentally overvalued, let me be clear, the biggest reason why shares of FIZZ have gone from $46.50 on January 18, 2017 to as high as $92.85, this past Thursday, is due to better earnings, buyout rumors, and the fact that the retail float is (approximately) less than 6 million shares. However, most of the move is the latter two items.

Source: Yahoo Finance

I would venture to guess that upwards of 95% of readers have never heard of SEC form: Schedule 14A. This is the form where insiders holders need to file their ownership with the SEC. Please click the hyperlink to FIZZ’s August 28, 2016 filing.

Enclosed below, take a look at the composition of FIZZ’s shareholder ownership. As you can see, insiders own 75.1% of total outstanding shares, and institutional investors own 12.5%. Also, notice that ETFs owns more than 1 millions shares (Vanguard and BlackRock). Therefore, the retail float of this supernova is less than 6 million shares.

The other dynamic is that, as of March 31, 2017, the Masters of the Universe (hedge funds) were short 2.36 million shares. As FIZZ shares have doubled from mid January to April 20, 2017, invariably, some weaker hand shorts have been squeezed and forced to cover, given the very thin float, which has contributed to the parabolic levitation of FIZZ shares.

Source: GuruFocus

Essentially, due to the very thin available float and the current cult like infatuation (also due to the lack of pure play investment vehicles with exposure to the sparkling water category) with the growth rates for sparking water (seltzer water), retail investors are confusing brains with a bull market in shares of FIZZ (I learned that saying while spending two summers, as an intern, at a Morgan Stanley Dean Witter financial advisory office, in Wellesley, MA way back in 1999 and 2000).

Switching gears and turning towards the fundamentals, during FY12 – FY16 FIZZ’s sales and earnings…