Green Mountain Coffee Roasters (GMCR) Shorts are at the highest they have been in over two years. Businessweek reports, “traders are paying the most for bearish options since April 2009 after short seller David Einhorn questioned accounting at the largest U.S. seller of single-serve coffee makers.”
Green Mountain Coffee Shorts Reach Two Year High
Green Mountain Coffee Roasters shorts, contracts that pay if the stock falls 10 percent of higher in three months, swelled to 10.21 points higher than comparable calls on October 20, 2011, representing the widest margin in more than two years. That margin has lessened slightly, falling to 8.29 points since then but the stark difference still represents a change in investor mindset. GMCR had reached a 52-week high of $115.98 on September 20, 2011. The stock most recently traded at $65.55 a share.
Investors Turn Bearish on Green Mountain Coffee
The change in investor sentiment came after hedge fund manager David Einhorn, Greenlight Capital, delivered a presentation at the Value Investing Congress on October 17, 2011. That morning GMCR was trading at $91.66 a share. By midday, just after Einhorn’s presentation, GMCR fell by over 11%. It recovered a little to close at $82.50 but has been sliding ever since. In his 110-slide presentation, Einhorn had criticized the company for “poor transparency,” “accounting discrepancies,” confusing quarterly financial presentations and June quarterly results that look “too good to be true.” Einhorn also criticized GMCR management, saying “management has been incredibly vague about where the money is going.”