Tempest in a K-Cup: Red Flags on Green Mountain

32 Pages Posted: 22 Aug 2015 Last revised: 6 Oct 2016

See all articles by Dennis Caplan

Dennis Caplan

State University of New York (SUNY) at Albany

Saurav K. Dutta

State University of New York (SUNY) at Albany

David Marcinko

Skidmore College

Date Written: May 27, 2015

Abstract

“Tempest in a K-Cup” discusses financial accounting and financial statement analysis in the context of Green Mountain Coffee Roasters. The case begins with background on the evolution of Keurig and Green Mountain. Next it discusses the rapid growth of Green Mountain and its step-wise acquisition of Keurig. The case focuses on events in 2011-2012, a period in which Green Mountain experienced significant stock price volatility, was challenged by the SEC about its financial disclosures and business relationships, and endured a public bashing by a well-known hedge-fund manager, David Einhorn of Greenlight Capital.

Students completing the case gain a better appreciation for the level of scrutiny that financial statements receive from regulators, investors, and journalists. Specific topics include the use of trend analysis, ratio analysis, and free cash flows in analyzing a company’s prospects, the risk of channel-stuffing, and the role of short-sellers in capital markets. The case requires students to critically read, analyze and apply accounting guidance with respect to sales returns, related party transactions, and segment reporting. The case also requires students to read and analyze communications between the Securities and Exchange Commission (SEC) and Green Mountain.

Keywords: Keurig Green Mountain, K-Cup, short selling, channel stuffing, razor/razor-blade pricing strategy

JEL Classification: I29, K22

Suggested Citation

Caplan, Dennis and Dutta, Saurav K. and Marcinko, David, Tempest in a K-Cup: Red Flags on Green Mountain (May 27, 2015). Available at SSRN: https://ssrn.com/abstract=2648493 or http://dx.doi.org/10.2139/ssrn.2648493

Dennis Caplan

State University of New York (SUNY) at Albany ( email )

135 Western Ave
Building, Room 109
Albany, NY 12222
United States

Saurav K. Dutta (Contact Author)

State University of New York (SUNY) at Albany ( email )

135 Western Ave
Building, Room 109
Albany, NY 12222
United States

David Marcinko

Skidmore College ( email )

815 North Broadway
Saratoga Springs, NY 12866-1632
United States

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