One of David Einhorn's winning shorts may have just been wiped out
On Monday, Keurig Green Mountain Coffee, the maker of K-cups, said it's being acquired by JAB Group for $92 a share, a deal giving the company a $13.9 billion valuation.
The $92 share price is a 78% premium to Keurig Green Mountain's closing share price of $51.70 per share on Friday.
Einhorn, the founder Greenlight Capital, reentered his famous short of Keurig Green Mountain in the third quarter.
"The second time has been a charm as our original thesis is playing out. So far, our third biggest winner this year," Einhorn wrote in his fund's third-quarter investor letter.
The letter also noted that Einhorn shorted the stock again at $102.08.
It's unclear if Einhorn is still in the short. Greenlight declined to comment.
If Einhorn is still short, the bet will have still been a winner.
Shares were trading at $89.95 on Monday morning, below the $102.08 share price where Einhorn starting shorting. Still, the bulk of the gains on the short side would have been wiped out.
It could mark yet another piece of bad news for Einhorn in what has been a challenging 12 months. Greenlight Capital's main fund was down 20.6% through the end of November. Einhorn is on track for his second-losing year ever. His only previous down year was in 2008, when his fund lost 23%.
The short thesis
Einhorn first disclosed his short position in October 2011 at the Value Investing Congress. His 100-plus slide-deck pointed out questionable accounting methods and possible limited demand for its K-Cup products.
In the third quarter of 2014, Einhorn wrote that he had covered, calling it an "ultimately unsuccessful short."
"We closed out a number of positions including the remainder of our short position in Keurig Green Mountain (GMCR). While it should be tempting to write an entire book on our experience with this ultimately unsuccessful short (our average sale was at $47.59 and our average cover was at $67.02; we had many opportunities to trade this position to a successful result, but failed to do so)...," the letter from 2014 said.
Even when he exited, he said that he still stood by his thesis about the company's accounting.
That letter continued: "As far as we can tell, everything we said about the shenanigans is unrefuted and accurate. In any case, time has passed and these misdeeds are now dated. The SEC spent four years looking into the allegations - or, rather, four years passed between when it opened an investigation and closed it."