Hedge Fund Billionaire David Einhorn Blasts Green Mountain Coffee: Cooked Books And A Dying Business Model

Hedge fund superstar David Einhorn took to hammering Green Mountain Coffee again, a company he’s been shorting for quite some time, noting their “books are cooked” and claiming their business model is dying as they’ve lost the monopoly on K-cup production.  The stock, though, has recovered from the massive declines it suffered in the aftermath of Einhorn’s scathing presentation in 2011, and was making further gains on Thursday after a solid earnings report.

Green Mountain Coffee is one of those stocks that have experienced wild swings in its stock price after being targeted by high profile hedge fund managers.  Back in October of 2011, David Einhorn, head of Greenlight Capital and a billionaire, presented a compelling short case against the maker of the K-cup that questioned everything from the company’s accounting to the viability of their business model.  The stock fell nearly 90% from there to the bottom on July 2012.

Einhorn, who is still short, is hurting.  Green Mountain Coffee is up more than 70% in 2013 and has delivered returns north of 260% since bottoming out.  Along with the release of their third quarter earnings, the company announced a $1 billion share buyback and a 25 cent per share quarterly dividend.

“It’s a very emotional stock,” Einhorn said speaking to CNBC’s Scott Wapner from the Robin Hood Foundation conference.  The hedge fund manager once again questioned the company’s accounting, noting he still has doubt s over where the capex is going, and adding “[their] numbers [are] a little cheesy.”  But Einhorn doesn't need the SEC to come down on the company for his thesis to play out, he argued.

The founder of Greenlight Capital reiterated the company’s competitive advantage is eroding, as Green Mountain Coffee has effectively lost its monopoly position by losing the exclusive patent to produce K-cups; "anyone can make K-cups," he said.  While the company had exclusive deals with Dunkin’ Brands and Starbucks , yet the company run by Howard Schultz is now producing its own single-serve brewer, competing directly with Green Mountain’s Keurig devices, while several others including Mondelez and illy coffee, to name a few, have their own capsule products.

“Pricing is beginning to come down,” Einhorn explained, adding that Green Mountain’s “monopoly margins” would begin to compress.

Regardless, investors continue to believe in the company, at least for now, as the impressive rally in the stock demonstrates.  With stock markets making record highs, it seems like the tide is lifting all boats.  “We’ve had a tough year in shorts,” Einhorn said, noting the Fed’s easy monetary policy has pushed equities close to bubble territory.