David Einhorn Still Short Green Mountain Coffee (GMCR)

Commodities Investing
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David Einhorn continues to bash Green Mountain Coffee Roasters (Nasdaq: GMCR). And the Vermont-based coffee brewer’s stock just keeps going lower.

Einhorn, the renowned manager of the $8 billion Greenlight Capital hedge fund, reiterated concerns about Green Mountain Coffee Roasters in an interview with Reuters on Tuesday. Back in October, at the Value Investing Congress in New York, Einhorn announced plans to short-sell GMCR shares, citing the company’s shady financials, ongoing SEC inquiry into its accounting practices, and impending expiration of its K-Cup patents. The stock has since nosedived, falling to $44.25 a share in early trading today – a 62% drop from its August high of $110 a share.

Despite Green Mountain Coffee’s precipitous fall, Einhorn says the worst isn’t over for the company.

“I think everything we said in the presentation is right now as it was then – and in many cases even more so,” Einhorn told Reuters.

Einhorn said he still doubts the company’s reported sales figures and spending plans. He said that GMCR’s capital spending plan of $665 million doesn’t add up, that the company’s audit of its accounting practices lacked any substance, and that it has no cash flow from operations.

Other highlights from Einhorn’s interview with Reuters:

  • On Green Mountain’s audit committee review about his allegations of misconduct: “Their response came only about three weeks after the presentation. … It doesn’t seem to make a lot of sense to think that somebody who took our concerns seriously would even be able to review it in three weeks. It kind of feels like a whitewash to me.”

 

  • On GMCR’s capital spending forecast in 2011 and 2012: “They said that they are going to spend $175 million (on manufacturing facilities). We were only able to find about $50-60 million of capital spending on the pieces that they say are the biggest pieces of the $175 million facilities and infrastructure spent. … It is very unlikely that they have an adequate explanation for where approximately $665 million of capital spending can reasonably go to support the growth of business.”

 

  • On the fair value of Green Mountain Coffee stock: “It seems to me that a business that doesn’t generate any cash – and this is before the monopoly position on the K-Cups disappears next September – if you don’t generate very much cash, it’s hard to understand why there is a large value.”

To read the full interview with David Einhorn, click here.

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