Bloomberg News

Green Mountain Drops as David Einhorn Says Market ‘Limited’

October 17, 2011

(Updates share price in second paragraph.)

Oct. 17 (Bloomberg) -- Green Mountain Coffee Roasters Inc. fell the most in two months after hedge-fund manager David Einhorn said the market for its Keurig single-cup brewers is “limited” and the company faces patent expirations.

The shares fell 10 percent to $82.50 at the close in New York, the biggest decline since Aug 18. Einhorn said he “has a position” in the shares.

“I believe the available market is smaller than the bulls believe it to be and that Green Mountain has already penetrated a good chunk of it,” Einhorn, president of Greenlight Capital Inc., said today during his so-called “GAAP-uccino” presentation at the Value Investing Congress in New York. “The market is limited,” he said.

The company also has a “litany of accounting questions,” Einhorn said, adding that it has reduced transparency and needs to improve disclosure.

Jonathan Doorley, a spokesman for Greenlight Capital, declined to comment on Einhorn’s position in Green Mountain stock. Suzanne DuLong, a spokeswoman for Green Mountain, declined to comment on Einhorn’s presentation.

Green Mountain has sought to boost sales through its Keurig brewer and single-serve K-Cups. The Waterbury, Vermont-based company partnered with Starbucks Corp. and Dunkin’ Brands Group Inc. earlier this year to sell branded K-Cups at cafes and in grocery and retail stores.

‘Patent Issue’

Green Mountain has a “looming patent issue” on its single-serve K-Cups and may lose its ability to “monopoly price” the packets by September, Einhorn said. He said that Green Mountain declined to speak to him while citing a quiet period.

Green Mountain, led by Chief Executive Officer Lawrence Blanford, has increased more than 10-fold during the bull market that began on March 9, 2009, the third-biggest gain in the Standard & Poor’s Midcap 400 Index. The shares trade for 52 times forecast earnings for 2011, compared with an average multiple of 15.4 for the index as a whole.

The company’s biggest holders on June 30 included Fidelity Management with 12.5 percent of the stock, according to filings with the Securities and Exchange Commission. Wellington Management had a 8.7 percent stake on that date and Vanguard Group controlled 3.3 percent, data compiled by Bloomberg showed.

Quarterly Earnings

Einhorn, the hedge fund manager best known for shorting Lehman Brothers Holdings Inc. before it collapsed in September 2008, has had mixed results in 2011. His Greenlight Capital sold a stake in Yahoo! Inc. for a “modest loss,” he told investors in a July letter. His attempt to buy a share of the New York Mets baseball team fell apart in September.

Green Mountain’s third-quarter profit more than tripled to $56.3 million, or 37 cents a share, according to a statement in July. Sales more than doubled to $717.2 million in the quarter ended June 25 from a year ago.

Einhorn called the results “perhaps a too-good-to-be-true quarter.”

--With assistance from Kelly Bit in New York. Editors: James Callan, Kevin Orland

To contact the reporters on this story: Leslie Patton in Chicago at Nikolaj Gammeltoft in New York at

To contact the editors responsible for this story: Robin Ajello at Nick Baker at

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