December 29, 2011 / 8:18 PM / 7 years ago

Diamond Foods gains on rumors of Einhorn investment

(Reuters) - Shares of Diamond Foods Inc DMND.O, currently the target of a regulatory probe, rose as much as 14 percent, after CNBC reported rumors that high-profile investor David Einhorn may have invested in the company.

When contacted, Einhorn, who runs hedge fund Greenlight Capital Inc, declined to comment. Diamond Foods also declined to


“For people who are long (on) Diamond stock, it would be a good thing... If someone takes a large stake who is a well regarded investor, others tend to follow like lemmings,” said an investor, who did not want to be identified.

The rumors come at a time when the U.S. Securities and Exchange Commission is probing the snack maker’s accounting of payments to walnut growers.

Diamond’s stock has lost more than half its value since it first announced an internal probe into the matter. It fell to its lowest level in two years after the SEC announced its probe earlier this month.

The probes center on allegations that Diamond delayed payments to farmers to make its earnings for the fiscal year ended July 31 look better while it negotiated to buy Pringles from Procter & Gamble (PG.N).

The maker of Emerald nuts, Kettle potato chips and Pop Secret popcorn, which agreed to buy the snacks foods brand for $1.5 billion in April, has since delayed the acquisition.

Einhorn was in the news recently after he cast doubt on Green Mountain Coffee Roasters’ GMCR.O accounting practices and long-term earnings power.

Shares of Diamond were trading up 9 percent at $32.04 on Thursday on Nasdaq. They earlier touched a high of $33.36.

Reporting by Chris Jonathan Peters & Arpita Mukherjee in Bangalore; Editing by Viraj Nair and Joyjeet Das

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