Green Mountain Escapes Secondary Offering Punishment (GMCR, SBUX, KFT)

Green Mountain Coffee Roasters, Inc. (NASDAQ: GMCR) is holding up better than we might have expected following its secondary offering.  The coffee conglomerate traded above $78.00 briefly this week after a huge jump in the shares from under $65.00 based upon earnings and guidance.

The company sold an aggregate 8,189,544 shares and stockholders also sold an aggregate of 410,456 shares, with a public price of $71.00 per share.  What is shocking is just how much Green Mountain held up even after it disclosed the secondary offering.  The stock is actually positive today with the stock up 0.37% at $73.94.  The price today never even really came close to the secondary price as the stock’s low today was only $71.82.

Even some of the caution brought up by Herb Greenberg on some its accounting nuances has not killed this rally, something which we also consider is worth more than just a mere footnote.  We had noted earlier that this secondary was not as dilutive as some may have feared at first.

Apparently, caution needs to be damned because Green Mountain’s past accounting and SEC issues were literally about 100% ago in share price gains.  Before the effect of this offering, the company had a market cap of about $10.5 billion.  Starbucks Corporation (NASDAQ: SBUX) was the game-changing event here as it dumped Kraft Foods Inc. (NYSE: KFT) as its coffee partner.

The underwriting group for Green Mountain was so large that we expect the coverage and the ownership of this high-flying coffee stock to expand.  BofA Merrill Lynch was the sole book-running manager; SunTrust Robinson Humphrey was co-lead manager; and co-managers were listed as William Blair, Canaccord Genuity, Janney Montgomery Scott, Piper Jaffray, RBC Capital Markets, Wells Fargo Securities, Rabo Securities, and Santander. Green Mountain granted the underwriters a 30-day overallotment option to purchase up to 1,290,000 additional shares of common stock.

The net proceeds for the company before considering an overallotment option were approximately $559.1 million.  If this price holds up, then the amount will be higher as that overallotment option gets exercised.

JON C. OGG