Hedge fund manager David Einhorn is taking an even harder line against Green Mountain Coffee Roasters (GMCR.O), his big short trade, claiming a recent audit committee review of the accounting issues he flagged is nothing more than a “whitewash.”
In an exclusive interview with Reuters, Einhorn said he still doubts sales figures and spending plans at the company, which saw its stock soar to $110 in August on the rapid growth of its individual coffee servings or K-cups. When Einhorn revealed in October that he had been building a short position in shares of the company for weeks, the stock tanked and it effectively turned things around for his $8 billion Greenlight Capital fund this year.
“I think everything we said in the presentation is right now as it was then — and in many cases even more so,” said the 43-year-old manager, who runs one of $2 trillion hedge fund industry’s better-known long/short funds and also is an accomplished poker player.
In the interview with Reuters, Einhorn blasted the company’s audit committee for conducting a “whitewash” review of the concerns he raised in an October 17 presentation entitled, “GAAP-uccino.” That presentation hit Green Mountain like a tidal wave, and has sliced the stock’s value in half to around $46 as of Tuesday trading.
Einhorn’s presentation seemed prescient and awoke traders to potential problems with Green Mountain’s growth story. Green Mountain reported a massive earnings disappointment in November in another blow to investor confidence. The stock, which had been a favorite of many in the hedge fund set — most notably John Thaler’s JAT Capital — now ranks as a popular short for managers.
Green Mountain spokeswoman Suzanne DuLong rejected the suggestion the company has given short-shrift to complaints about its accounting practices.
“The audit committee, with the assistance of counsel and a forensic accounting firm, completed its investigation of accounting practices at the company in December 2010,” she said. “Most recently, as our CEO and president, Larry Blanford reported in the November 2011 earnings call: ‘We are confident there is no misconduct, there is no wrongdoing.’”
In recent years, Greenlight Capital has emerged as one of the more influential hedge fund firms, and Einhorn is one of a handful of savvy traders who can move markets with his “short’ calls. Einhorn made his name by warning about Lehman Brothers Holdings Inc’s (LEHMQ.PK) financial health before the investment bank’s bankruptcy, and from a long-running battle with the management of Allied Capital Corp (AFC.N), an investment company.