Surprise news Monday that a private investment consortium would buy Keurig Green Mountain Coffee Roasters for a huge premium spurred a massive share rally for the coffee maker, and for the moment at least erased a big chunk of the prior gains that short seller David Einhorn had made recently.
Einhorn, who is president of the $10 billion hedge fund Greenlight Capital, has been skeptical of the stock for years. He took a bearish, or short, position on Keurig shares at an average cost of $102, according to a late-October investor letter that referred to the trade as "our third-biggest winner this year."
As of Friday, Keurig shares had plunged to about $52, creating a roughly 49 percent gain on the position (not including any investment costs Greenlight may have incurred).
But all that changed Monday, when the investment firm JAB Holding announced its plan to acquire Keurig for $13.9 billion, marking a huge 78 percent premium on the price as of Friday's close. Given that Keurig has agreed to the buyout, the deal seemed a relatively sure thing, and the coffee maker's stock price rallied to the $90 range.
It was not immediately clear whether Greenlight still held its Keurig position, and a spokesman for the fund company said that Einhorn was declining to comment. But even if the trade was still intact, Greenlight would appear to be in the black even at $90, given the $12 spread between its average shorting price and where the stock was trading Monday.