Fevertree Drinks (LSE:FEVR) shares haven’t labored out nicely for UK traders lately. However the inventory jumped 25% final week on information of an funding from the US – and there may be extra to come back.

I’m very ambivalent in regards to the announcement that induced the inventory to surge. Nevertheless, information {that a} director has been shopping for a whole lot of shares since then has caught my consideration. 

US growth

The rationale Fevertree shares have been climbing is as a result of US beverage big Molson Coors has made an $88m funding for 8.5% of the enterprise. And there are some apparent advantages for the UK agency. 

The corporate has been trying to increase throughout the Atlantic, and Molson Coors has an enormous distribution community. So entry to this – plus advertising assist – might be an enormous profit. 

On prime of this, Fevertree’s stability sheet is in fairly good condition. Consequently, the corporate intends to return money raised within the $88m funding to shareholders through share buybacks. 

This, nevertheless, is the place I begin to get blended emotions. The agency has simply bought 8.5% of its shares at £6.93 per share and plans to make use of the money to launch a buyback at round £7.78.

This makes the transfer dangerous for Fevertree – promoting issues at one price after which shopping for them at a better one is a approach of dropping cash. Traders must hope the distribution advantages are value it. 

They may nicely be – and progress within the US might give general gross sales an enormous increase. However the instant winner is Molson Coors, which now owns a whole lot of shares value 25% greater than it paid for them.

Insider shopping for

Because the Molson Coors deal, nevertheless, one thing else has occurred. Fevertree’s Chief Monetary Officer Andrew Branchflower has purchased 31,688 shares within the enterprise. 

The typical price on this transaction is £7.85 – roughly the place the inventory is now – making the general funding value virtually £250,000. That’s a severe funding by an organization insider. 

Branchflower isn’t new to the agency both – he’s been with the enterprise for over a decade. And that makes me suppose that he’s taking the brand new partnership with Molson Coors very critically. 

The those who spend all their time working at an organization will virtually all the time have a greater view than those who don’t. So once they begin utilizing their very own cash to purchase shares, it’s value paying consideration.

I wouldn’t purchase shares in any enterprise simply because another person is doing so. And that’s true whether or not the individual in query is Warren Buffett, an organization director, or anybody else. 

I do, nevertheless, suppose that is one thing for traders who’re within the inventory to concentrate to. It would even be an indication the market is underestimating the agency’s prospects, even after a 25% acquire.

Ought to I purchase?

Fevertree’s newest deal includes promoting shares at one price earlier than shopping for them again at a better one. Which means there’s a threat it might finish up trying foolish if issues don’t pan out as anticipated.

There’s much more to the deal than this and if issues go nicely, it might seem like a superb transfer. And administration placing its cash the place its mouth is unquestionably makes me wish to take a more in-depth look.