Diamond Foods Inc., undergoing an internal probe into whether money paid to walnut growers violated accounting rules, plunged the most ever after the Wall Street Journal reported that farmers questioned payments.
Diamond declined 23 percent to $31.30 at the close in New York for the biggest drop since its initial public offering in July 2005. The shares surged 53 percent on Dec. 9 after an analyst at KeyBanc Capital Markets said the probe will conclude quickly and won’t jeopardize the acquisition of Pringles from Procter & Gamble Co.
Diamond faces shareholder lawsuits that claim the company may have used payments to walnut growers to shift costs from the fiscal year that ended July 31 into the current year, the newspaper said.
The company has previously said payments to the growers in September were an advance on their 2011 crop, the Journal reported. Three growers told the company they didn’t intend to deliver their 2011 crops to Diamond, and were still told they could cash their checks, the newspaper said, citing interviews. The three said Diamond told them checks were to top up payments for their 2010 crops.
Paul Kranhold, a spokesman for Diamond, said the payments were confidential and the company wouldn’t comment further.
‘Rethink the Deal’
Last month, Diamond said that the probe would delay the acquisition of Pringles potato chips from Procter & Gamble in a deal valued at $2.35 billion.
“The Pringles business is doing pretty well and if these issues continue P&G might not get the value they could be getting for that asset,” Louis Meyer, an analyst at Oscar Gruss & Son in New York, said in a telephone interview. Meyer has a “hold” rating on the shares.
Paul Fox, a spokesman for P&G, said in a telephone interview that the company is “committed to the deal.”
The audit committee said it may conclude its investigation by the middle of February, San Francisco-based Diamond said today in a statement. As a result, the company will delay filing its Form 10-Q for the fiscal first quarter beyond today’s deadline.
“Today’s announcement from Diamond isn’t a surprise,” Fox said.
On Nov. 23, Diamond shares tumbled after CNBC reported that company director Joseph Silveira committed suicide Nov. 15. Silveira had served on the audit committee and recused himself from its investigation. He was 64.