This story has been updated from 11:10am EST to include a decline to comment from Pepsi and stock price change.
NEW YORK (TheStreet) - SodaStream (SODA - Get Report) shares were surging 13.1% to $40.49 on Thursday, recovering all of the losses and then some from the night before on market speculation that it could be acquired by PepsiCo (PEP - Get Report).
SodaStream's share spike and speculation comes after news broke last night that Coca-Cola (KO) is taking a 10% stake in Green Mountain Coffee (GMCR) and the two will be exclusive partners when the coffee make releases its Keurig for cold beverages in 2015.
With SodaStream having a stronghold on the at-home carbonated beverage making industry (much more so internationally than in the U.S.), that temporarily put the Israeli company's stock in an "ut-oh moment" in post-markets trading. However, SodaStream shares quickly rebounded and then some on investor's hopes that the Coca-Cola/Green Mountain Coffee news would fuel Pepsi to acquire the company.
According to Citron Research, short interest in SodaStream shares is near a 52-week-high. As of Jan. 15, it was 8.7 million shares, or 42% of the outstanding -- that's 54% of the float.
"After a year which promised hyper-growth, but delivered somewhat less than spectacular earning,s SodaStream ended trading yesterday at a 52-week-low -- but now everything has changed," a Citron note on Thursday said.
"It is an understatement to say that Coke vs. Pepsi is a pre-eminent corporate rivalry. Now Coke has made their move into the at-home beverage market. What are the chances Pepsi won't respond?" the note added. "Unless they believe that Coke is DEAD WRONG. They have no choice: Hello SodaStream!"
"Pepsi has no place else to turn," the note said, referring to SodaStream's leading position and known brand in the make-it-at-home cold and carbonated beverages area with a substantial global footprint (the non-North America market is more than 50% of their revenues) and it has already build and earned a distribution network.
"They are a substantial force in that business, and they built it on their own, a significant achievement. If Pepsi were to invest in SodaStream or buy it outright, they are not just buying a concept."
This is not the first time a hook up between Pepsi and SodaStream has been speculated about. Last June, reports surfaced that both Pepsi and Coca-Cola were considering bids for the soda-machine maker. Pepsi and Coca-Cola had denied the rumors at the time.
Pepsi declined to comment to TheStreet on Thursday.