Daivd Einhorn: Maybe It’s Time To Asking Questions Like, “Why The F*ck Did A Startup Texting Service Sell For $19 Billion?”

Or something along those lines.

…there is a clear consensus that we are witnessing our second tech bubble in 15 years. What is uncertain is how much further the bubble can expand, and what might pop it. In our view the current bubble is an echo of the previous tech bubble, but with fewer large capitalization stocks and much less public enthusiasm. Some indications that we are pretty far along include:

  • The rejection of conventional valuation methods;
  • Short-sellers forced to cover due to intolerable mark-to-market losses; and
  • Huge first day IPO pops for companies that have done little more than use the right
    buzzwords and attract the right venture capital.

And once again, certain “cool kid” companies and the cheerleading analysts are pretending that compensation paid in equity isn’t an expense because it is “non-cash.” Would these companies be able to retain their highly talented workforces if they stopped doling out large amounts of equity? If you are trying to determine the creditworthiness of these ventures, it might make sense to back out non-cash expenses. But if you are an equity holder trying to value the businesses as a multiple of profits, how can you ignore the real cost of future dilution that comes from paying the employees in stock? Given the enormous stock price volatility, we decided to short a basket of bubble stocks.

Greenlight Letter To Investors [PDF]

Related: Mark Zuckerberg Out Of Money To Buy Dick-Pic Messaging Service

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9 Responses to “Daivd Einhorn: Maybe It’s Time To Asking Questions Like, “Why The F*ck Did A Startup Texting Service Sell For $19 Billion?””

  1. Match the Bess says:

    Bess, how did you answer the question about wanting kids on eHarmony?

  2. guest says:

    The same reason hair plugs cost so much…Supply and demand. Now watch me front run your trade.


  3. St. Copious says:

    The tech bubble speculation is interesting, but the next section about how Greenlight and a bunch of other smartest-guys-in-the-room got their faces ripped off by the CFO of a German car company is way more entertaining.*

    *Unless you are a Greenlight employee or LP. Then it's probably painful.

  4. Best and brightest? says:

    Target as well…how humbling is it to be beaten by fuddy-duddies from Minnesota

  5. Eat it says:

    Creating dick pic service > hedge fund

  6. Rusty Cohle, CFA says:

    Start asking the right F'ing questions

  7. ralph says:

    I don't think there's an overall "bubble" within the whole tech industry but I do think that certain companies are bubbling up, some of which are tech which gives the impression that all of Tech is in a bubble. AND yea, who the f*ck would pay 19Billion for a messaging service????