Home » Behavioural Investing » Chipotle Mexican Heart Burn. Litigation and Controversial Board $CMG $PFE $MCD

Chipotle Mexican Heart Burn. Litigation and Controversial Board $CMG $PFE $MCD

Image representing Jeffrey Kindler as depicted...

Image via CrunchBase

Chipotle Mexican Grill (NYSE:CMG) continues to attract problems and create questions.

Class Action problems continue to circle. On September 19, 2012, an Atlanta-based litigation boutique announced an investigation for potential breaches of fiduciary duty by officers and directors of Chipotle Mexican Grill, Inc. Just four days earlier, a different law firm announced a class action on behalf of shareholders who purchased stock in the company between February 1, 2012 and July 19, 2012. The lawsuits charge directors and management with issuing false and misleading statements which failed to express the effects that thinning demand and higher prices would have on Chipotle’s margins and financial results. More class actions have been announced from the Law Offices of Howard G. Smith and another from Glancy Binkow & Goldberg LLP.

You can say that is par for the course. But check out the weird management structure. They have a little used Co-CEO structure. So who is in charge? Who is responsible and accountable? Who makes the burritos.

Last but not least eyebrows have been raised over the appointment of Jeffrey Kindler, former CEO at Pfizer (NYSE:PFE), to Chipotle’s Board. Fortune Magazine published an article questioning if he belittled subordinates, micro managed the business and generally proved himself to be devoid of leadership and communication skills. Chipotle has not commented on why they think he was a good choice for director.

Influential hedge fund manager David Einhorn. Mr. Einhorn, who runs $7.7 billion fund Greenlight Capital, said in early October that “the restaurant chain will face significant competition and additional costs, making it an attractive ‘short.” Which means he already has taken the positions that he wants.

So David Einhorn was probably looking at a 30 PE on trailing earnings, no dividend in site, net money flow of 0.75 and a short interest of 11.53% of public float.

Wasn’t this stock once part of McDonald’s (NYSE:MCD) but was a forced spin out divestiture?

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti

Advertisements