Diamond Foods, Inc. (NASDAQ: DMND) is now an at-risk company. The fears about the audit committee’s findings are as bad or worse than what the skeptics were expecting, and the news just shows that guessing about an outcome like this without having the same access as the insiders is a total coin toss. The move today is on volume that is already greater than any single day in at least the last two years.
The nut products maker fired its CEO and CFO and that prior board member suicide sure appears to be a ‘falling on the sword’ ahead of shame. Diamond Foods is now going to restate its earnings for the fiscal years of 2010 and 2011:
- “The Audit Committee has concluded that a “continuity” payment made to growers in August 2010 of approximately $20 million and a “momentum” payment made to growers in September 2011 of approximately $60 million were not accounted for in the correct periods, and the Audit Committee identified material weaknesses in the Company’s internal control over financial reporting.”
Here are the changes in the company: Rick Wolford, a director, will serve as Acting President and Chief Executive Officer. Michael Murphy, of Alix Partners, LLP, will now serve as Acting Chief Financial Officer. Diamond Foods has said that it is going to search for permanent replacements in the CEO and CFO positions. Robert J. Zollars, who previously served as Lead Independent Director, is now going to be the Chairman of the Board.
Shares were down 2.6% at $36.66 on Wednesday against a 52-week trading range of $26.11 to $96.13. Shares were down almost 40% at $22.00 in the after-hours session Wednesday and the trading in the first hour of trading is down 35% at $23.94 on already more than 17 million shares.
Count the Procter & Gamble (NYSE: PG) sale of Pringles as a dead issue, and the Department of Justice inquiry is still outstanding.
Awful news. Very awful. Sadly, this situation does not appear to be over. The cockroach theory is that if you see one roach, many other roaches are in hiding.
The analysts were mostly wrong here, and some calls were beyond belief now. We expect not just more downgrades but expect the stock to be dropped from coverage.
JON C. OGG
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