SodaStream’s Birnbaum suspected of insider trading linked to 2018 PepsiCo deal

Chairman of drinks-maker detained and questioned, then released on bail, for allegedly giving associate advance word of acquisition announcement

SodaStream CEO Daniel Birnbaum (l) and PepsiCo’s CEO Ramon Laguarta at the SodaStream factory in Israel’s Negev Desert next to the city of Rahat on August 20, 2018. (Eliran Avital)
SodaStream CEO Daniel Birnbaum (l) and PepsiCo’s CEO Ramon Laguarta at the SodaStream factory in Israel’s Negev Desert next to the city of Rahat on August 20, 2018. (Eliran Avital)

Daniel Birnbaum, the former CEO and current chairman of Israeli home carbonation company SodaStream, is being investigated for insider trading connected to the acquisition of the firm last year by US beverage giant PepsiCo, which he orchestrated.

The soda giant paid $3.2 billion, or $144 a share, for SodaStream last year, in one of the largest buyouts in Israel’s history.

Birnbaum was detained Monday, questioned on suspicion of insider trading, fraud and breach of trust in a corporation, and released under restrictive conditions on the same day, according to Hebrew-language media reports.

He was questioned for a second time on Tuesday at the Tel Aviv offices of the Israel Securities Authority.

Birnbaum’s connection to the case was initially barred from publication by a court order, but was cleared for publication on Tuesday.

He has been released on NIS 1.2 million ($343,000) bail, with an order banning him from leaving the country.

SodaStream — a maker of machines that carbonate home tap water in reusable bottles — said in a statement Tuesday that “the company will cooperate as needed to assist the Israel Securities Authority to exhaust the investigation.”

Daniel Birnbaum, CEO of SodaStream, seen at the Haifa University on April 11, 2016. (Hadas Parush/Flash90)

In July, Birnbaum said he would be stepping down as the firm’s chief executive officer after 12 years to become its chairman. He left the position on August 1 and entered his new role on September 1.

“Following 12 amazing years with you all, and upon completion of the first year of integration with PepsiCo, I’ve decided to step back from the day-to-day operations at SodaStream,” said Birnbaum in a letter to employees at the time. “PepsiCo’s CEO asked me to stay on as Chairman and I am honored and delighted to do so.”

Other SodaStream employees arrived at the ISA offices on Tuesday to give testimony in the case, including Birnbaum’s successor as CEO and former deputy chief, Eyal Shohat.

Birnbaum is suspected of providing significant inside information to a former SodaStream employee and a longtime associate — whose name is barred from publication — on three different occasions.

SodaStream CEO Daniel Birnbaum photographed at the SodaStream factory near the Negev city of Rahat. (Dan Balilty/AP Images)

In two of the incidents  — in February 2017 and August 2018 — the inside information allegedly shared by Birnbaum related to positive periodic reports, before they were published. The third incident occurred later on August 2018, when he was said to have disclosed details of the PepsiCo mega-deal before it was publicized and sent SodaStream’s shares soaring.

The associate allegedly purchased SodaStream shares worth hundreds of thousands of shekels before the information was publicized.

Using that method, she allegedly made a total of NIS 156,000 ($44,000), acquired illegally. She is also suspected of insider trading and obstruction of justice.

Birnbaum’s attorney, Yuval Sasson, has refused to comment.

Liran Zilberman, the lawyer representing the associate, said: “The suspicions regarding my client are preliminary. My client presented a clear version of events in her investigation and I assume that as the investigation concludes it will be proven that her actions were not criminal or wrong.”

PepsiCo has not commented on the case.

Under Birnbaum’s leadership, the company started targeting health-conscious and green-leaning consumers with messages whipping US beverage giants like Coca-Cola and PepsiCo.

The firm positioned itself as a brash David providing a healthier alternative to the drinks offered by its Goliath competitors, which use massive amounts of sugar and sell their products in planet-killing plastic bottles.

Shoshanna Solomon contributed to this report.

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