Shares of PepsiCo (NASDAQ:PEP) are gaining ground in Tuesday’s premarket trading on the heels of reports that Elliott Investment Management has accumulated a substantial stake in the snack and beverage company.
According to The Wall Street Journal, Elliott now holds a $4B stake amid efforts to make “changes to boost its sagging share price.”
Elliott’s position in PepsiCo (NASDAQ:PEP), which is reportedly the hedge fund’s largest equity position ever, makes it one of PepsiCo’s (NASDAQ:PEP) top five active investors, excluding index funds, sources said to the WSJ.
Recent shifts in consumer tastes, especially in regard to carbonated beverages, as well as lost market share in its snack business has resulted in a 14% decline in shares year-over-year versus only -4% for rival Coca-Cola (KO). Additionally, Pepsi has dropped to fourth place in U.S. sales volumes behind Coke (KO), Dr. Pepper (KDP), and Sprite (KDP).
The publication suggests PepsiCo (PEP) could initiate strategies similar to those taken by Coca Cola (KO) such as returning company-owned bottling operations to local, independent bottlers, or possibly split the company into two entities – food and beverage – to unlock value at the beverage business.
“The issues we’ve seen in the past, like weak demand for beverages in North America, are becoming more and more apparent which should worry long-term investors,” Seeking Alpha analyst Julia Ostian said.
“After this year’s slip, it was a solid quarter for PepsiCo, but it doesn’t change the core concerns around growth sustainability and payout quality,” Ostian added.
PepsiCo (PEP) shares are up 5% ahead of Tuesday’s open, while Coca Cola (KO) and Keurig Dr Pepper (KDP) are only fractionally higher.