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08-05-2012 21:12:00

UPDATE: Green Mountain Chairman Sells 5 Million Shares On Margin Call

Relateret indhold

--Falling share price forces Green Mountain chairman to sell 5 million shares

--Sale shrinks chairman's stake in Green Mountain by more than a third

--Green Mountain's stock lost about half its value in the past week

(Adds details throughout about margin calls, the chairman's background and other holdings as well as an updated share price in the 17th paragraph.)

By Corrie Driebusch


NEW YORK -(Dow Jones)- A plummeting stock price has forced Green Mountain Coffee Roasters Inc. (GMCR) founder and Chairman Robert Stiller to sell 5 million shares of the coffee company's stock, according to a regulatory filing Tuesday.

The sale shrinks Stiller's stake in the company he founded and led for more than 25 years by more than a third and raises concerns that he may be forced to sell more shares of Green Mountain if the stock price continues to fall.

Green Mountain representatives didn't return messages for further comment.

Investors can borrow from banks or brokerages using their stock portfolios as collateral. Because of stock-market volatility, banks require investors to maintain a balance in their accounts that is a certain percent, or margin, of what they have borrowed. If stock prices fall sharply, investors must deposit more money into their margin accounts to maintain the required cushion.

A margin sellout, such as in the case of Stiller, occurs when a broker liquidates an account after a margin call fails to raise the cushion to the required level.

Green Mountain's stock has lost roughly half its value in the past week, triggering the margin call on Stiller's stake. Late last Wednesday the company lowered its profit guidance for the full fiscal year after it reported selling fewer brewers and K-cups than expected in its fiscal second quarter.

Stiller, who founded Green Mountain in 1981 as a small cafe in Vermont, at one point owned nearly 45 million shares in the coffee company. Since 2000 he has been divesting ownership. As of March 27, Stiller was the second-largest shareholder of Green Mountain, with nearly 15 million shares, or a 9.67% stake, in the company, according to FactSet Research.

The majority of Stiller's stake is in margin accounts or being used as collateral. According to Green Mountain's most recent proxy statement, of the nearly 16 million shares Stiller owned in late January, about 12.5 million were held in margin accounts or pledged as collateral for one or more loans.

Stiller also has a large stake in Krispy Kreme Doughnuts Inc. (KKD), owning about 12% of its outstanding shares.

As Green Mountain's chief executive, Stiller brought the company public in 1993, the same year it made an early investment in Keurig Inc. In 2006, Stiller led Green Mountain to fully acquire Keurig, making the company the dominant player in the single-serve coffee brewing market. Now nearly all of its revenue comes from the brewers, their K-cup coffee pods and other related accessories.

In 2007, Stiller stepped down as CEO and took on the role of chairman.

Green Mountain's stock took off in 2006 when it acquired Keurig. Its stock, trading below $5 at the time, steadily rose to the $30s by 2010 and then skyrocketed to more than $100 last August. The stock then started tumbling, thanks to skeptical comments by hedge-fund guru David Einhorn and the anticipation of new competition.

Green Mountain faces stepped up competition this autumn, when Starbucks Corp. (SBUX) plans to launch a high-end espresso brewer and two of Green Mountain's patents on K-cup technology expire.

During February, Stiller sold a total of 1 million of his Green Mountain shares, or about 6.9% of his stake at the time, for $66.3 million. The sales preceded rival Starbucks Corp.'s March 9 announcement that it would enter the single-serve coffee brewer market, news that sent Green Mountain's stock down nearly 16% that day.

The February stock sale left Stiller about $13.7 million richer than if he had sold the shares after March 9, according to regulatory filings.

Starbucks says it informed Green Mountain of the news before it made its March 8 announcement, a fact that Green Mountain has acknowledged in prior statements. Stiller's trades weren't part of a pre-programmed trade called a 10b5-1 transaction, which is designed to prove executives aren't basing trades on inside information.

In recent trading Tuesday, Green Mountain shares rose 7% to $26, recovering a bit of their recent loss. Before Tuesday, the stock had fallen 51% since the company's earnings on Wednesday and 78% from its high in September.

During the financial crisis, plummeting stock prices set off a wave of margin calls. Among the prominent executives caught up in the squeeze were Sumner Redstone, the chairman of Viacom Inc. (VIA, VIAB) and CBS Corp. (CBS), and Chesapeake Energy Corp. (CHK) Chief Executive Aubrey McClendon, who had to sell most of his stake in Chesapeake at a significant loss.

-By Corrie Driebusch, Dow Jones Newswires; 212-416-2143; corrie.driebusch@dowjones.com

--Tess Stynes and Annie Gasparro contributed to this article.

(END) Dow Jones Newswires

May 08, 2012 15:12 ET (19:12 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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