NEW YORK (AP) — Shares of Diamond Foods Inc. slid more than 10 percent in premarket trading Friday after a published report of a federal inquiry into whether the snack maker's financial practices involved criminal fraud.
On top of that, two large stockholders recently sold most of their shares.
At issue is Diamond Foods' accounting for crop payments to walnut growers. In December Diamond Foods disclosed in a regulatory filing 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, which makes Emerald nuts and Pop Secret popcorn, has said it will cooperate fully with the SEC.
On Thursday, The Wall Street Journal, citing people familiar with the matter it did not name, says the U.S. attorney's office in San Francisco is working with the SEC to look into the matter. The report says the federal agencies will probably wait for Diamond to finish its own inquiry before deciding whether to bring charges against the San Francisco company.
Representatives for Diamond Foods and the U.S. attorney's office in San Francisco could not be immediately reached for comment Friday.
The controversy over the accounting for the payments has delayed the Diamonds' 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.
Also on Friday, Del Mar Asset Management disclosed it now holds 40,000 shares. The company sold about 1.9 million shares, according to FactSet.
In a separate filing, BAMCO Inc. disclosed sold all of the 1.5 million shares in the company that it owned.
Diamond currently has about 22.1 million shares outstanding.
Diamond's stock is down 57 percent since Sept. 1 as concerns have grown over the crop payments.
Diamond's shares tumbled $3.45, or 10.4 percent, to $29.68 before the market opened Friday.