Diamond Foods, the maker of Kettle chips whose planned acquisition of Pringles is clouded in uncertainty, confirmed that it would not be able to file its latest quarterly earnings by a Monday deadline due to an internal accounting probe.
The news sent Diamond’s share price down by 23 per cent by mid-afternoon in New York trading, the latest dramatic swing in an increasingly volatile stock.
The Californian company – which had been set to acquire Pringles potato chips from Procter & Gamble this month in a stock deal worth $2.35bn, including debt – said on Monday that it would not file its earnings until after the accounting probe, which it expects to end in mid-February.
The company said: “Diamond will take steps to file its [earnings statement] for the first quarter as soon as practicable after conclusion of the [accounting] investigation.”
More than half of Diamond’s shares are held in short positions by investors who are betting they will fall, an unusually high proportion.
The probe concerns Diamond’s accounting for crop payments to walnut growers and has disrupted the plans of P&G, the world’s biggest consumer goods company, to exit the food business.
Food was out of place alongside P&G’s line up of shampoos, detergents and toothpastes but it took the company several years of searching to find a buyer in the form of Diamond, which it announced in April.
Diamond, which also makes Emerald nuts and Pop Secret popcorn, initiated the investigation in November after receiving an “external communication” about its payments to walnut growers.
In line with procedures of the Nasdaq stock exchange, where it is listed, Diamond said it expected to receive a notice that the company is not in compliance with market reporting rules. The snack maker intended to “submit a plan to regain compliance as quickly as possible”.
In the meantime, the stock will continue to be listed and traded.
The fall in Diamond shares on Monday took them down to $31.30. They had soared by nearly 53 per cent on Friday when Akshay Jagdale, senior analyst at KeyBanc Capital Markets, said in a research note that he expected the investigation to show that Diamond had properly accounted for various payments and that the Pringles deal would go through.
But he added that “management’s credibility has been undermined significantly by the recent allegations”.
P&G said: “Today’s news is not a surprise given the investigation that Diamond is conducting. We remain committed to closing this deal in the second half of our fiscal year.”