Once the board got wind of the trade, they probed further and it was found that the deal was made "at a time when the trading window in GMCR stock was closed" and that the stock sales were "inconsistent with its internal trading policies." Green Mountain issued a statement saying, "The board determined that it was in the best interest of the company and its shareholders for Mr. Stiller and Mr. Davis to relinquish their leadership positions on the board as well as their committee roles."
The mysterious Mr. Market
Stiller served as CEO of Green Mountain until 2007, when he resigned from the post and took over as chairman. The man became a billionaire when Green Mountain's stock skyrocketed last year. Its shares were trading near $5 in 2006, when the company bought Keurig, and gradually reached the $30 mark by 2010. As the popularity of Green Mountain's famed Keurig brewer rose, so did the company's stock, breaking the $100 barrier last year. Since then, the stock has nosedived, from an all-time high of $115.98 last year to somewhere below the $30 mark, at which it is trading now.
Investor Whitney Tilson said that Green Mountain's situation reminded him of that of Krispy Kreme Doughnuts
Green Mountain's stock has been on the decline ever since renowned hedge fund manager David Einhorn made a bearish call on the company, as he questioned its accounting practices as well as its expiring patents. The looming patent expiry, along with Starbucks'
During its recent earnings call, Green Mountain slashed its sales growth outlook from 65% to 50%, which led to its shares plummeting by 40%. At the same time, Starbucks' decision to enter the market where the Keurig brewer rules the roost is definitely a point of concern. Starbucks claims that its brewer, called the "Verismo," is not intended to rival the Keurig brewer, and it aims to directly compete with Nestle's coffee machine instead. But isn't the world's largest coffee purveyor's entry into the market a tad worrisome? After all, do you really expect people drinking Starbucks' Verismo-made drink to have a K-Cup immediately after? I highly doubt it.
Green Mountain has been burned by short-sellers and has lost a considerable amount of value. Would you stick with it? What I'm going to do is watch this stock from the safety of the sidelines. You can do the same with the help of our free Watchlist service.
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