Diamond Foods surged more than 7 percent in Thursday trading as rumors swirled that hedge fund manager David Einhorn may have acquired a stake in the company.
There had been chatter on the Internet on trading sites since Wednesday, but shares spiked shortly after those rumors were reported the CNBC.
Greenlight Capital Inc., Einhorn's firm, would not comment. Officials with Diamond Foods could not be reached.
Diamond Foods, which makes Emerald Nuts and Pop Secret popcorn, is in the midst of a federal investigation by the over crop payments to walnut growers and its shares have been taking a beating, worth about a third of what they were in September.
The San Francisco company disclosed in a regulatory filing earlier this month that it had received a formal order of investigation from the Securities and Exchange Commission. Regulators become involved after the company's own inquiry into how it accounted for the payments, which some critics say were used to inflate last year's earnings by shifting costs into the current year. Diamond has said it will cooperate fully with the SEC.
The controversy over the accounting of the payments has delayed the company's roughly $1.5 billion acquisition of the Pringles chip brand from Procter & Gamble Co. It would be the biggest acquisition for Diamond Foods ever, making it the second-largest snack company in the nation behind PepsiCo Inc.
Einhorn first became known widely following a 2002 speech in which he accused Allied Capital, a financial firm, of fraudulent practices.
The company's shares tumbled by double digits in one day. That company was found by the SEC to have violated securities laws. Six years later, Einhorn began talking about short positions he had taken against Lehman Brothers, citing its exposure to the teetering real estate market. Five months later, Lehman Brothers disintegrated.
Shares of Diamond Foods Inc. gained $2.15 to $31.55 in afternoon trading. The shares have traded between $26.11 and $96.13 over the last year.
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