Case | HBS Case Collection | December 2012

Trouble Brewing for Green Mountain Coffee Roasters

by Suraj Srinivasan and Michael Norris

Abstract

In October 2011, noted hedge fund manager David Einhorn of Greenlight Capital delivered a presentation at an investors' conference analyzing the business and accounting quality weaknesses of Green Mountain Coffee Roasters. Until then Green Mountain had exhibited rapid business and stock price growth. He questioned Green Mountain, the maker of Keurig single-serve coffee machines and their famous K-Cups about their growth prospects, their handling of acquisitions, their plan for the expiration of an important patent, accounting practices and other issues. Following Einhorn's presentation Green Mountain's stock experienced a significant decline despite claims by many analysts that Einhorn had not presented any new information. The case presents Einhorn's argument and the counter claims by the analysts. Students are charged with assessing the merits of Einhorn's arguments and the counter claims. The case exposes students to a detailed strategic, financial and accounting analysis of a business and provides an example of how a thorough business and accounting analysis using primarily public information can change market's perception of valuation of a company.

Keywords: earnings management; accounting; accounting fraud; accounting quality; accounting red flags; Accounting restatements; accounting scandal; accounting information; Financial Accounting; financial analysts; financial analysis; financial intermediaries; hedge funds; Financial ratios; financial statement analysis; financial statements; Mergers & Acquisitions; financial reporting; valuation; valuation methodologies; earnings quality; Quality; Earnings Management; Valuation; Crime and Corruption; Mergers and Acquisitions; Financial Reporting; Investment Funds; Financial Statements; Food and Beverage Industry;

Citation:

Srinivasan, Suraj, and Michael Norris. "Trouble Brewing for Green Mountain Coffee Roasters." Harvard Business School Case 113-035, December 2012.