Green Mountain replaces chairman after stock sale

(Reuters) - Green Mountain Coffee Roasters Inc removed its chairman Robert Stiller after a plunge in the stock price forced the company’s founder to sell 5 million shares to meet margin call requirements.

Green Mountain Coffee single-serve K-Cups are pictured in New York, May 3, 2012. REUTERS/Brendan McDermid

The company, which named director Michael Mardy as its interim chairman, also said it removed William Davis from the position of lead director for the same reason.

“Once the board was notified of (Stiller’s and Davis’ forced stock sales), it moved quickly to investigate and address this matter,” Green Mountain said, calling the stock sales “disappointing.”

Both Stiller and Davis sold Green Mountain shares to maintain margins on investment accounts, where they had borrowed against their holdings.

When the value of such investments fall and an investor cannot cover the margin, a broker can force the liquidation of some of the investor’s holdings.

Financial adviser Michael Yoshikami, CEO of Destination Wealth Management, said that the margin sell-out shows that Stiller was not risk-averse, as it is risky for people to put up a lot of their own stock in margin accounts.

Green Mountain, maker of the Keurig single-serve coffee brewers, also said Stiller and Davis will not serve on any of its board committees and will not receive future payment for being directors until further notice.

The governance and nominating committee will also review the board’s structure and composition. However, both Stiller and Davis will still remain on the board, Green Mountain said.

The board also demanded that Stiller and Davis settle all outstanding margin loans by the end of this year.

About 548,000 shares were sold from Davis’ account on Friday and Monday at a time when the trading window in the stock was closed due to the company’s internal trading policy, Green Mountain said in its statement late Tuesday.

The stock shed almost half its value last week, as investors lost confidence in management after the company cut its outlook and badly missed sales estimates.

Stiller, who also holds a 11.9 percent stake in Krispy Kreme Doughnuts Inc, sold 1 million Green Mountain shares in February, albeit at a much higher price.

The latest stock sale by Stiller, who founded Green Mountain in 1981, cuts his stake in the company by a third to roughly 6 percent, according to Thomson Reuters data.

The stock was down 4 percent in extended trade, after closing up 8 percent at $26.38 on the Nasdaq.

Reporting by Mihir Dalal in Bangalore; Editing by Anthony Kurian