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How Monster Beverage Shares Rose 7.2% Last Month

What happened
Shares of Monster Beverage (NASDAQ: MNST) gained 7.2% in April 2022, according to data from S&P Global Market Intelligence. That may not sound like much of a boost, but it’s an impressive gain when you consider that the S&P 500 (SNPINDEX: ^GSPC) market index lost 8.8% over the same period. Monster delivered solid gains in a tough month for the stock market, as a whole.
Image source: Getty Images.

So what
Monster’s gains in April hinged on a legal case that’s been hanging over the energy-drink maker’s head for years.
On April 6, an arbitrator ruled that Vital Pharmaceuticals, which makes the Bang Energy workout-oriented energy drink, is guilty of trademark infringement and breach of contract. Vital was ordered to pay $185 million in damages and legal fees and give Monster a 5% royalty on sales of the Bang drinks.
The case involved a company known as Orange Bang, which already marketed energy drinks under the Bang name when Vital’s first Bang drinks appeared in 2008. Vital continued to develop and sell Bang drinks, claiming that it wasn’t competing against Orange Bang’s energy drink (and later, other energy drinks such as Monster). Bang was classified as a nutritional supplement, not a juice or an energy drink, based on its addition of liquid creatine.
Monster got involved in Orange Bang’s trademark dispute in 2019. The companies signed an agreement to partner on the legal work, leaving the litigation costs for Monster to pay and sharing the damage-recovery fees half-and-half.
Orange Bang gets to keep half of the arbitrator’s award, and Monster gets the other half. More to the point, the 5% royalty takes the sting out of Bang’s presence as a successful rival. If Vital refuses to pay the royalty, the company would be prohibited from selling drinks under the Bang name.
Now what
That award isn’t the end of Monster’s legal tussles with Vital. Several other cases are still going through the legal system where Monster accuses Vital of unfair trade practices, false advertising, misappropriation of trade secrets, and more. The resolution of the Orange Bang case is a small but important step toward untangling the web of legal challenges and Vital’s competitive position in the energy-drink market.
On May 5, Monster followed up on April’s good news with a mixed earnings report. The company saw 22% sales growth but fell short of Wall Street’s earnings estimates due to high costs of shipping, drink ingredients, and packaging. Monster’s stock barely moved on the news.
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Monster Beverage. The Motley Fool has a disclosure policy. –

What happened

Shares of Monster Beverage (NASDAQ: MNST) gained 7.2% in April 2022, according to data from S&P Global Market Intelligence. That may not sound like much of a boost, but it’s an impressive gain when you consider that the S&P 500 (SNPINDEX: ^GSPC) market index lost 8.8% over the same period. Monster delivered solid gains in a tough month for the stock market, as a whole.

Image source: Getty Images.

So what

Monster’s gains in April hinged on a legal case that’s been hanging over the energy-drink maker’s head for years.

On April 6, an arbitrator ruled that Vital Pharmaceuticals, which makes the Bang Energy workout-oriented energy drink, is guilty of trademark infringement and breach of contract. Vital was ordered to pay $185 million in damages and legal fees and give Monster a 5% royalty on sales of the Bang drinks.

The case involved a company known as Orange Bang, which already marketed energy drinks under the Bang name when Vital’s first Bang drinks appeared in 2008. Vital continued to develop and sell Bang drinks, claiming that it wasn’t competing against Orange Bang’s energy drink (and later, other energy drinks such as Monster). Bang was classified as a nutritional supplement, not a juice or an energy drink, based on its addition of liquid creatine.

Monster got involved in Orange Bang’s trademark dispute in 2019. The companies signed an agreement to partner on the legal work, leaving the litigation costs for Monster to pay and sharing the damage-recovery fees half-and-half.

Orange Bang gets to keep half of the arbitrator’s award, and Monster gets the other half. More to the point, the 5% royalty takes the sting out of Bang’s presence as a successful rival. If Vital refuses to pay the royalty, the company would be prohibited from selling drinks under the Bang name.

Now what

That award isn’t the end of Monster’s legal tussles with Vital. Several other cases are still going through the legal system where Monster accuses Vital of unfair trade practices, false advertising, misappropriation of trade secrets, and more. The resolution of the Orange Bang case is a small but important step toward untangling the web of legal challenges and Vital’s competitive position in the energy-drink market.

On May 5, Monster followed up on April’s good news with a mixed earnings report. The company saw 22% sales growth but fell short of Wall Street’s earnings estimates due to high costs of shipping, drink ingredients, and packaging. Monster’s stock barely moved on the news.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Monster Beverage. The Motley Fool has a disclosure policy.

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