Full disclosure: I like tea. Teavana got me to like tea. Its original store in Atlanta's Lenox Square Mall taught me to appreciate the differences between green and black, taught me how to brew it up right, and even taught me about red "bush" tea from Africa.
But a Teavana store is nothing like a Starbucks. Even if you're a regular tea drinker, you go there about once a month. Its accessories are overpriced, and if you become a tea fiend you find over time its tea is too pricey, too. It's a great place to learn what you like, but once you know that you often go elsewhere.
This reality made Teavana the most shorted stock in America and caused shares to fall steadily, from about $28 after launch to about $10 when SBUX made its bid, which came in at $15.50. So if you believed in the company, you were lucky to get out with half your money, and you will run off with that like you stole something.
Or you'll sue, as one New York law firm is thinking of doing.
Antoine Gara says Starbucks is bidding to become a "caffeine-fueled IBM," but what does that even mean? The company already has a tea unit, Tazo, purchased in 1999, and its flavored tea bags can make a nice change from the regular brew. But Tazo should have proven to Starbucks by now that you don't buy tea the way you do coffee, even if you drink it that way.
What Teavana has that is of value is some real estate and a brand. It recently expanded into Canada, taking over a chain called Teatopia and currently have 300 outlets. But these stores are not doing what Starbucks does at all. They're selling expensive loose tea out of buckets; they're doing a considered sale. There's nothing spontaneous, nothing fast about what they do. And, again, if Starbucks wanted something fast, it already has Tazo.
CEO Howard Schultz must have something up his sleeve. He says the category is "ripe for reinvention and rapid growth," and compares it to espresso 30 years ago. So if you're buying SBUX today, you're betting that Schultz has some keen ideas for reinventing how Teavana does business, for essentially turning that business around in some way.
Because otherwise this deal makes no sense.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.