Diamond Foods, Inc. (DMND) rose 7.2% yesterday “after CNBC reported that hedge fund manager David Einhorn may have taken a stake in the snack maker,” reports Bloomberg. So far, no one is confirming or denying the speculation.
“Diamond is undergoing an internal and U.S. Securities and Exchange Commission investigation into whether it violated accounting rules,” writes Bloomberg. “Last month, the company said the internal probe would delay its purchase of Pringles potato chips from Procter & Gamble Co. (PG) in a deal valued at $2.35 billion.”
The investigation is expected to conclude quickly, but the fact of it has led some analysts to call the idea that Einhorn would invest in DMND with such an investigation going on is “counterintuitive.”
On November 30, Wellington Management Company filed a 13G with the SEC stating that it had bought just under 3 million shares, or a roughly 13.60% stake. According to its website, it is an investment management provider. One of Wellington’s primary functions is “to identify and evaluate appropriate investment solutions and strategies for our common clients.”
David Einhorn, the founder and manager of Greenlight Capital, is well-known as an activist investor, and is no stranger to providing capital in exchange for a stake of a company. He was looking for an arrangement like that when he offered to give the New York Mets a $200 million loan in exchange for a minority stake of the team. Under the proposed terms, the Mets would have 5 years to repay the loan and, if they failed, would be required to sell a majority stake to Einhorn under the terms of the agreement. The deal ultimately fell through, but maybe that means that Einhorn could be looking for another, similar investment opportunity.