Green Mountain Coffee Roasters Founder Sold Stock Prior To Starbucks' Announcement
According to a new Bloomberg article, Green Mountain Coffee Roasters' (NASDAQ: GMCR) founder and chairman, Robert Stiller, sold $66.3 million in stock before shares plunged on news that Starbucks (NASDAQ: SBUX) had developed a rival system to GMCR's Keurig coffee brewer. The sales occurred on February 15 and February 24, and were his largest monthly divestments since "at least 2003," according to Bloomberg.
If Stiller had made the transactions after Starbucks announced its competing brewer on March 8, he would have received $13.9 million less for his stock. On March 9, Green Mountain shares fell 16% on the perceived substantial competitive threat from Starbucks. Furthermore, a Starbucks spokeswoman has confirmed that the company informed Green Mountain of its plans prior to making a public announcement.
Naturally, this information is causing market observers to cast a suspicious eye on Stiller's stock sales and their convenient timing. This view is bolstered by the fact that the sales were not part of a 10b5-1 plan, which is a type of pre-programmed selling schedule used by corporate executives that is set up in advance to show that decisions are not being based on inside information.
On August 4, however, Stiller submitted paperwork to the SEC showing that he intended to sell as many as 2 million GMCR shares. It is unlikely that he would have had any information about Starbucks' new brewing machine, called the Verismo, at this time. This information could give credence to the argument that Stiller was looking to reduce his stake in the company that he founded, irregardless of what was going on at Starbucks.
Nevertheless, the perception of potential impropriety exists surrounding his February trades in Green Mountain stock. James D. Cox, a securities law professor at Duke University, told Bloomberg that “It's something that the SEC would want to look at." He added, "If he has inside information, he has to withdraw from the market.” After the well-timed sales, Stiller remains the largest individual shareholder in Green Mountain with 13.4 million shares, or an 8.7 percent ownership stake in the Waterbury, Vermont based company.
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