Not so sweet for investors…

August 2, 2004

Nearly a year ago, I noted that Krispy Kreme (KKD) had disclosed some unusual related party transactions involving former Krispy Kreme executives in its 10-Q. At the time, the stock was trading at around $40 a share and because it was doing so well, few people seemed to be asking questions about the sweetheart deals buried deep in the footnotes. But last week, the company disclosed that the SEC was nosing around and asking questions about its franchise repurchases. The stock, which began falling in May after a profit warning that the company blamed on the low-carb diet craze, fell to around $15. While the SEC never comments on ongoing investigations, it seems as if they’ve found something interesting buried in Krispy Kreme’s footnotes.

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