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Tesla critic says Musk’s company resembles Lehman Brothers

Oct 06 2018 11:00
Simone Foxman, Bloomberg

David Einhorn, a prominent critic of Tesla, bashed the electric carmaker, saying its woes resemble that of Lehman Brothers Holdings before the bank failed.

“Like Lehman, we think the deception is about to catch up to TSLA,” Greenlight Capital said in a quarterly letter Friday seen by Bloomberg. “Elon Musk’s erratic behavior suggests that he sees it the same way.”

Einhorn pointed to parallels by saying “Lehman threatened short sellers, refused to raise capital (it even bought back stock), and management publicly suggested it would go private” in the months leading up to the bank’s collapse.

The money manager rose to prominence for his wager against Lehman, which he outlined in a presentation at a conference in May 2008.

In his letter Friday, Einhorn said his short position on Tesla was his second biggest winner in the third quarter. This year is shaping up to be Greenlight’s worst ever. Its main fund has lost 26% through September.

The hedge fund also exited Apple in the third quarter at $228 (about R3 400) a share after first buying it in 2010. The firm made more than $1bn (about R15bn) on its position, the letter said.

Einhorn said Greenlight’s efforts helped move Apple to aggressively repurchase stock, driving up earnings-per-share. But the manager sold his position, saying the company’s valuation is now less enticing and he has concerns about the US trade war with China, where iPhones are assembled.

The firm is “somewhat worried about Chinese retaliation against America’s trade policies,” the letter said.

Other highlights from the letter:

The biggest winner during the quarter was Brighthouse Financial, which announced a share buyback during the quarter.

Greenlight added a position in Altice USA, which should benefit from rebuilding its network with fiber in the next few years.

The firm exited Micron Technology when his team sensed that DRAM prices could fall. Regulatory risks around social media companies caused the hedge fund to exit its stake in Twitter after a 78% gain in eight months.

Greenlight’s largest disclosed long positions at the end of the third quarter were AerCap Holdings, Brighthouse, General Motors, Green Brick Partners and gold.

In the letter, Einhorn said that after a two-day offsite review of the firm’s positions in September, he believes it has a "deep understanding" of their portfolio. Some changes were made but Greenlight is mostly sticking with their ideas.

“Most of our company theses are intact,” the letter said.

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tesla  |  elon musk
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