Greenlight Capital

David Einhorn Sees A Lot Of His Nana In Apple

“It is kind of like my grandma Roz. She wanted to hoard money. She would not leave me a message on my answering machine because she did not want to be charged for a phone call. It is really hard to convince somebody with that mindset to change what they’re doing. We have come up with what we think is a win-win situation for Apple where Apple gets to keep its war chest, they get to keep the money, they get to have it for bad times, for growth, for acquisitions.”[Bloomberg TV, earlier]

David Einhorn is suing Apple to make them give shareholders a separate vote over whether shareholders should have a vote over whether Apple can issue preferred stock. I guess that requires some unpacking. Let’s start at the end, with the preferred stock. Here is Einhorn’s plan:

For example, Apple could initially distribute to existing shareholders $50 billion of perpetual preferred stock, with a 4% annual cash dividend paid quarterly at preferential tax rates. … Assuming Apple retains its price to earnings multiple of 10x and the preferred stock yields 4%, our calculations show that every $50 billion of perpetual preferred stock that Apple distributes would unlock about $30 billion, or $32 per share in value. Greenlight believes that Apple has the capacity to ultimately distribute several hundred billion dollars of preferred, which would unlock hundreds of dollars of value per share. Further, Greenlight believes additional value may be realized when Apple’s price to earnings multiple expands, as the market appreciates a more shareholder friendly capital allocation policy.

What do you think? I vote yes. (I mean, I think it’s a good idea. The voting is more complicated.) My math is here and ties closely to Einhorn’s:


The math is super straightforward though it can and should boggle you conceptually if you think about it. Read more »


Greenlight Capital Fourth Quarter Letter [ValueWalk]

So I guess the Einhorn effect hasn’t yet taken London by storm? There’s this:

David Einhorn’s $7.7 billion hedge fund Greenlight Capital Inc. disclosed a short position of 4.4 percent in the shares of Daily Mail and General Trust Plc, which publishes the U.K.’s second-biggest selling daily newspaper.

Greenlight’s bearish bet on London-based Daily Mail and General Trust, disclosed today on the website of the U.K.’s Financial Services Authority, was the biggest short position revealed by any hedge fund against a U.K. company under rules that took effect last week.

And yet there’s also this:

What are you doing, England? Don’t you know that when David Einhorn is short a stock, that stock goes down? There are rules here you know; today’s mild drop is not enough to comply. Read more »

In other GL third quarter updates, sources at Brovada say the investment team has swung from two point underdogs to 13.5 point favorites in the annual interoffice basketball game and the Greenlight baby-making machine continues to around the clock. Read more »

During a presentation on Tuesday at which he was expected to reveal his latest bearish thesis, Mr. Einhorn, a hedge fund manager, introduced a discussion of General Motors with an ambiguous line. Mr. Einhorn, the president of Greenlight Capital, pivoted on the ticker symbol of Green Mountain Coffee Roasters, a target of his criticism last year. “If you take the CR away from GMCR, you get G.M.,” Mr. Einhorn said. Shares of General Motors plunged, before investors realized that the assessment of the automaker was positive. Mr. Einhorn emphasized the folly of taking his ideas on faith. “It doesn’t make sense to blindly follow me or anyone else into a stock,” he said as a preface to his presentation at the Value Investing Congress in Manhattan. “Do your own work. And when a successful investor shows you their work, check their work.” [Dealbook]

  • 18 Sep 2012 at 1:30 PM

The Mystery Of Einhorn

The Journal has a nice article about David Einhorn today, making the point that he can move stocks with the sheer power of his disapproval. Not even disapproval, really; a raised eyebrow will suffice, as it did for HerbaLife. Imagine his parenting skills.

Here is a chart from the Journal and I guess you win a cookie if you can tell me how it’s calculated:

But you get the gist: on average (er, median), an Einhorn seal of disapproval lops 4.9% off a company’s market cap in one day, and 13% in a month. You can argue that he is just excellent at picking stocks that are about to drop precipitously, but the repeated one-day success seems like pretty clear evidence that the market is reacting to, rather than independently fulfilling, his predictions.

So, first off: this is a great skill to have! I think that in part because I am very lazy and have always imagined a hedge fund manager’s job as being to come into the office, point at a stock, say “that one,” and go home for the year while the stock he picked makes him rich. I don’t think it works that way, though; stocks tend to move for reasons in the external world unrelated to your simple desire to make yourself rich, so you have to spend your days, like, doing research and stuff. But when your desire to get rich off a stock pick makes it so, that is metaphysically delightful.

It’s particularly delightful for a short seller. (Though also: sort of puzzling for a short seller.) We’ve talked before about a paradox of short selling where: Read more »