The troubles never seem to end for Green Mountain Coffee Roasters, Inc. (NASDAQ:GMCR) and on Tuesday, a new chapter has been written for the troubled company.
Green Mountain chairman and founder Robert Stiller was slammed with a margin call and was forced to sell about five million shares in the company; this represented about a third of his total position.
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It shouldn’t come as a complete surprise given the latest trading of the stock, which is already off 50% this month, but it doesn’t give investors a lot of confidence when the company’s leader has to cover a margin call.
At the time of this writing, the stock is up 6.44% while the markets are down 1%. That’s “good news” for the company but compared to the stock’s history in the last year, that picture is less pretty. Last September, the shares topped out above $115; this came around the time the hedge-fund manager David Einhorn bet against the company.
Einhorn Gives A Thumbs-Down
Remember that story? In October, David Einhorn bet against the stock and prepared a not-so-easy to read 100-page presentation that included the topics of expiring patents, insider trading and negative cash flows.
Fast forward to March of this year when Green Mountain dropped 14 percent on March 9, fearing a loss of its monopoly after Starbucks Corporation (NASDAQ:SBUX) announced plans to launch a rival coffee machine.
In addition to Einhorn, the naysayers continued with other Green Market market watchers seeing problems with the company. The blog, White Collar Fraud, published two pieces prior to the release of Green Mountain’s May 3 earnings report. They discussed the company’s toxic inventory build up since the beginning of fiscal year 2011.
It’s an interesting read when you factor in that the author, Sam Antar, has a connection to Crazy Eddie.
From last week’s report that disclosed a lower guidance, a cut in its outlook and missed sales estimates in the second quarter fiscal year 2012 earnings report, the stock tanked to a two-year low.
What’s the next shoe to drop?
On the day of Green Mountain’s earnings, a few analysts shared some thoughts. Stifel Nicolaus analyst Mark Astrachan noted that in September, two of the company’s key K-Cup patents will expire. In a Bloomberg article, Astrachan said he anticipates the competition to affect the company’s K-Cup pricing, moving it to raise its promotions; this could end with a share loss.
Janney Capital Markets analyst Mitchell Pinheiro also had something to say and took a positive position toward Green Mountain; he restated his “Buy” rating on the stock.
Pinheiro said, “Some investors were concerned with management statements that growth rates were moderating, but this should not have come as a surprise.” He took the stance that the company has prospered from an increasing consumer base who has jumped over to the dark side of drinking single-cup coffee. This increasing rate won’t continue as less consumers switch to good ‘ol coffee makers.
He wrote in a research note, “(Green Mountain) is not a broken growth story. The underlying growth remains strong. Keurig is the dominant player in the single cup coffee category, and we see no change in its strategic positioning, profitability, or market share potential.”
How many other analysts and market watchers will continue to sing a positive tune?