In 2002, David Einhorn was asked at a charity investment conference to share his best investment advice -- Shorting sell Allied Capital. At the time, Allied was a leader in the private financing industry. Einhorn claimed Allied was using questionable accounting practices to prop itself up. In 2008, Einhorn advised the same conference to short sell Lehman Brothers.
Einhorn was right on both cases.
These are stories shared in his newly revised bookFooling Some of the People All of the Time
, a book calling for effective government regulation, free speech, and fair play.
Fast forward to October 2010, during the annual value investing congress, David Einhorn made a famous short call on St. Joe Company. Einhorn questioned St. Joe’s accounting practices in evaluation the land and stated that the company should have written down some land and properties. The call had its impact on the stock price of JOE, for it reached a low of a little over $17 per share during November of 2010 vs. its pre-announcement of about $25.
In the cases with Allied Capital or Lehman Brothers, the managements of the targeted companies tried to defend their companies vigorously. With St. Joe, Einhorn found himself at odd mostly with another Guru Investor Bruce Berkowitz, who controlled about 30% of the company.
Einhorn offered to debate with Berkowitz over the stock, but the later offered instead to send Einhorn a box of chocolate. Further, taking advantage of the lower prices, Berkowitz bought more shares during the final quarter of 2010.
St. Joe’s stock price has since recovered as well. Today, it closed at about $23, near its price before Einhorn’s short call. It looks like the debate between Einhorn and Berkowitz would be settled with money: Einhorn sells and Berkowitz buys, until the one with more money wins.
Then there is this twist after the normal trading hour:
In the case for Allied Capital, despite the repeated urge of Einhorn, it took years before SEC took on the case and investigated the accounting practice of company. It looks like this time around somebody has learned his/her lesson.
The battle between Einhorn and Berkowitz goes on.
Now GuruFocus readers have the opportunities to ask the question about why exactly he thinks Einhorn got it wrong and he got it right. Go ahead and ask the question, the Guru will answer.
Einhorn was right on both cases.
These are stories shared in his newly revised bookFooling Some of the People All of the Time
, a book calling for effective government regulation, free speech, and fair play.Fast forward to October 2010, during the annual value investing congress, David Einhorn made a famous short call on St. Joe Company. Einhorn questioned St. Joe’s accounting practices in evaluation the land and stated that the company should have written down some land and properties. The call had its impact on the stock price of JOE, for it reached a low of a little over $17 per share during November of 2010 vs. its pre-announcement of about $25.
In the cases with Allied Capital or Lehman Brothers, the managements of the targeted companies tried to defend their companies vigorously. With St. Joe, Einhorn found himself at odd mostly with another Guru Investor Bruce Berkowitz, who controlled about 30% of the company.
Einhorn offered to debate with Berkowitz over the stock, but the later offered instead to send Einhorn a box of chocolate. Further, taking advantage of the lower prices, Berkowitz bought more shares during the final quarter of 2010.
St. Joe’s stock price has since recovered as well. Today, it closed at about $23, near its price before Einhorn’s short call. It looks like the debate between Einhorn and Berkowitz would be settled with money: Einhorn sells and Berkowitz buys, until the one with more money wins.
Then there is this twist after the normal trading hour:
In the case for Allied Capital, despite the repeated urge of Einhorn, it took years before SEC took on the case and investigated the accounting practice of company. It looks like this time around somebody has learned his/her lesson.
The battle between Einhorn and Berkowitz goes on.
Now GuruFocus readers have the opportunities to ask the question about why exactly he thinks Einhorn got it wrong and he got it right. Go ahead and ask the question, the Guru will answer.
