Einhorn Attacks Green Mountain Coffee Roasters

Tuesday, 18 Oct 2011 02:57 PM

By Dan Weil

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You probably wouldn’t guess which stock trading on a major exchange has performed best over the last five years – the last five years until Monday anyway. It’s Green Mountain Coffee Roasters.

But you probably have heard of the famous investor who’s shorting the stock. It’s David Einhorn, head of hedge fund firm Greenlight Capital, The New York Times reports.

And his criticism of the company has helped push the share price down 12 percent so far this week.

The stock had risen more than 30 times from October 2006 before Einhorn went to work Monday. At an investment conference in New York, he attacked Green Mountain in a report titled “GAAP-uccino.” GAAP stands for generally accepted accounting principles.

The company has “poor transparency,” Einhorn said, according to The Times. He criticized Green Mountain’s financial reporting, accusing it of “shenanigans” in its accounting for acquisitions.

The company also is engaging in excessive capital spending, which is growing much faster than its underlying business, Einhorn said.

Einhorn isn’t too impressed with Green Mountain’s “K-Cup” single-cup coffee servings. “This is a luxury item that is priced outside the range of many households,” he said.

Not everyone is bearish on Green Mountain.

Analysts at Longbow Research recently upgraded the shares to a buy. “K-Cups represent essentially all of Green Mountain's single-cup profit base and should continue to accelerate meaningfully,” the analysts write in Barron’s.

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