Founder of Green Mountain Coffee Roasters dumps US$50M stake in Krispy Kreme Doughnuts following ouster from Green Mountain for stock sale that violated company policy
May 9, 2012
– The founder of Green Mountain Coffee Roasters Inc., who was ousted from board leadership for a stock sale that violated company policy, said the sale was triggered after he was caught off guard by a fall in the company's stock price.
Robert Stiller, who also dumped his $50 million stake in Krispy Kreme Doughnuts Inc., said in an interview that he didn't expect Green Mountain's shares to fall so steeply last week, which triggered him to sell the shares on a margin call. That happened during a blackout period, during which the company prohibits the sale of its stock by executives with inside information.
As for reports that he leads a lavish lifestyle, Stiller noted that he is retired and bought a yacht five years ago because he enjoys traveling and being on the water with friends.
"Maybe I shouldn't do these things, but I've worked my life building this company and it's been successful," Stiller said. "I want to enjoy it. Whether it's living lavishly, I think that's all relative."
Stiller noted that he is retired and that his stock portfolio is his main source of income.
A filing made with the Securities and Exchange Commission Wednesday shows Stiller also sold his 8 million shares of Krispy Kreme Doughnuts Inc. at a price of $6.15 each. Stiller was the second-largest shareholder of Krispy Kreme, according to FactSet. A representative for Krispy Kreme could not immediately be reached.
The disclosure comes a day after Green Mountain said it was removing Stiller and another board member from their leadership roles because of stock sales that violated company policy.
Those sales happened to cover margin calls. A margin call is triggered when investors borrow using their stock portfolio as collateral and have to make up the balance required by banks when the share prices fall and the collateral is worth less.
Green Mountain Coffee, based in Waterbury, Vt., saw its stock price fall last week after the company lowered its profit forecast, saying it expects its sales to grow more slowly. That followed a tumble earlier this year after Starbucks said it will introduce its own single-cup brewing machine in time for the holiday season.
Stiller, who also makes about $50,000 a year in fees as a Green Mountain director, said he received a call from Deutsche Bank on Friday about an hour and a half before the market closed, noting that he needed to come up with cash or sell shares.
"They changed what they would lend to me from 60 percent to 30 percent," Stiller said.
The fall of Green Mountain's stock price compounded the problem; he said he liquidated his other positions, including his stake in Krispy Kreme, as a result. Stiller said Green Mountain was aware that his stock was collateral in a margin account.
Green Mountain's stock lost roughly half its value last week, which triggered the margin calls for Stiller and lead director William Davis that forced them to sell a total of more than 5.5 million shares. Green Mountain bars executives with inside information — such as Davis and Stiller — from trading its stock during certain periods.
The company, which makes single-cup Keurig coffee machines and coffee pods, said Stiller and William Davis would remain on the board as it investigates the matter but that the two would be removed from their leadership roles and have their pay suspended. Green Mountain said it is requiring Stiller and Davis to settle all their outstanding margin loans by the end of this year.
Stiller owns roughly 8.34 million Green Mountain shares, the company said. If he sold all the stock in his margin accounts, his stake would shrink to about 1.9 million shares. Davis owns 436,786 shares, and his stake would shrink to 36,598 in that scenario.
Stiller founded Green Mountain in 1981 and served as the company's president and CEO until May 2007. Since then, he had served as the company's board chairman.
Shares of Krispy Kreme were up 18 cents at $6.53. Green Mountain shares were down 34 cents at $26.04.
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