The roller coaster ride that is Diamond Foods (NASDAQ:DMND) turned into a death drop Thursday, when the company announced a corporate overhaul stemming from a scandal about payments to walnut farmers.
DMND shares were down 37% in midday trading Thursday after the company announced it was placing CEO Michael Mendes and CFO Steven Neil on “administrative leave,” and that Diamond Foods would have to restate its fiscal 2010 and 2011 financial statements.
The announcements come in the wake of bad accounting regarding payments to walnut farmers during the past two years — a story The Wall Street Journal broke in fall 2011 that has resulted in high-volatility spurts for DMND shares ever since. The company’s audit committee found that two payments — $20 million in 2010 and $60 million in 2011 — were incorrectly recorded, CNN Money reported.
The fluctuations primarily are a result of investor uncertainty about the future of a lucrative deal between Diamond Foods and Procter & Gamble (NYSE:PG) for the latter’s Pringles potato chip brand. The deal, originally announced in April, was valued at the time for $2.4 billion. Before today, speculation about the deal has sent DMND stock down 60% since its September peak, with several sharp single-day movements in between.
Director Rick Wolford, a member of the Diamond board of directors and former CEO of Del Monte Foods, has been appointed to replace Mendes in the interim, and consultant firm Alix Partners’ Michael Murphy will step in at CFO.
– Kyle Woodley, InvestorPlace Assistant Editor