One of the joys of the blog is that I have several readers who are WAY smarter than me. One pointed out that I did NOT get it wrong in my Peet’s short. [To get the background you simply must read this post first.]
I thought that Peet’s was overpaying for a license to put their coffee in k-cups. I was wrong.
But my smart reader thought that either
(a). the license to put coffee in k-cups was written as expected (favourable to Green Mountain but unfavourable to Diedrich) – in which case Peet’s was overpaying for Diedrich or
(b). the license was favourable to Diedrich – in which case you could bet that Green Mountain – a much richer company than Peet’s – would simply and massively overbid Peet’s to own Diedrich.
If Peet’s was overpaying for Diedrich then I was going to win on my short.
If Peet’s was not overpaying for Diedrich then they would wind up in a bidding war with Green Mountain – in which case I could cover at a profit anyway.
Now tell me why I did not short Peet’s big time when they bid for Diedrich? Stupidity I guess.