Investors bet on the wrong Cuba
Some investors celebrated President Obama's decision to normalize diplomatic relations with Cuba by pouring money into Cuba Beverage.
There's just one problem. Cuba Beverage is a San Diego energy-drink company that has absolutely nothing to do with the country. But traders aren't going to let a little detail like that get in the way. Viva la revolucion!
Shares of Cuba Beverage soared more than 100 percent Wednesday -- to all of 4 cents. That's the most action Cuba Beverage has seen since January, when shares touched a nickel. The company, which had sales of $86,000 last year, is traded over the counter and was called Green Card Capital until 2010. It had a number of names before that, including Green America Land Holdings, Innotelco and International Precious Metals Corporation.
The change to Cuba Beverage seems to have worked -- the company's market value hit $3 million in Wednesday's share spike.
How could Wall Street confuse an energy drink company with a country? Is this a case of algorithms gone wild? It's not the first time traders have goofed on the news. The Wall Street Journal, which first reported Cuba Beverage's price spike, noted that Wall Street had a similar reaction earlier this year when Facebook (FB) bought virtual-reality company Oculus VR. Shares of the unrelated Oculus Vision Tech rose 142 percent in response.
Also this year, shares of Nestor rose 1,900 percent after Google (GOOG) bought Nest Labs. And Tweeter Home Entertainment has been mixed up with Twitter (TWTR).
Some stocks were getting a legitimate bump on the U.S.-Cuba news. Shares of cruise lines rose Wednesday on expectations that the Obama administration would lift many travel restrictions to the country. Carnival Corp.'s (CCL) share price jumped more than 3 percent, Norwegian Cruises (NCLH) rose 2.5 percent and Royal Caribbean (RCL) rose nearly 5 percent.
A closed-end mutual find with ties to Cuba also jumped in value. The $45 million Herzfeld Caribbean Basin Fund saw a 42 percent share spike to $9.67. The fund's top holdings are Copa Holdings, Mexican bottler Coca-Cola Femsa SAB and Seabord Corp.