In an 8-K filed this morning, Diamond Foods (DMND) disclosed that it received a formal order of investigation from the SEC. To our view, this is not a good development for DMND, as it appears to be an escalation of the situation.
An SEC investigation moving from informal to formal allows the SEC to issue subpoenas. In general, this is only done when some entity in the mix is failing to voluntarily provide SEC investigators with the information, records, or testimony deemed necessary to conducting their investigation.
With this in mind, we have 3 questions DMND investors need answered.
- What people or entities received the subpoenas?
- What information, records, or testimony do the subpoenas seek?
- In the 8-K, DMND stated that it “intends to cooperate fully with the SEC.” How does cooperating fully with the SEC reconcile with the SEC’s decision to move the investigation to formal status and issue subpoenas?