Friday, June 2, 2017

"Einhorn Compares GM to Apple and Explains Why He’s Short Tesla" (TSLA; GM)

The stock is definitely losing some of the momentum that drove it to yesterday's intraday all-time high at $344.88, closing today at $339.85, off a fraction of a percent on the day:
From Barron's Focus on Funds:

What Greenlight Capital's co-founder discussed with David Westin on Bloomberg TV Friday morning.
Greenlight Capital's David Einhorn appeared on Bloomberg TV to talk about General Motors (GM) and his plan to unlock shareholder value, yet again.

Makes sense given the auto company is holding its annual meeting next week Tuesday. We'll all find out soon enough if Einhorn's proposed dual-class share will take a step forward or go by the way of his iPrefs idea for Apple (AAPL).

Bloomberg TV provided with a transcript of the video that can be seen here.
Here are the highlights from Einhorn's discussion with David Westin: 
How the dual-class share will unlock value
It has to do with choice.  Think of it as an ice cream stand that sells just vanilla chocolate swirl.  There's some people who like vanilla chocolate swirl, and we'll call those the GM shareholders.  But if chocolate is the dividend and vanilla is the rest of the operation, imagine if you sold chocolate, vanilla, or swirl, in any combination that you want.  That ice cream stand would attract more customers....MORE
...Why he's short Tesla
Tesla is one of many things we have in what we so call our bubble basket of stocks that we just think are mispriced and are mispriced by huge, huge amounts.  And their sized in a way that gives us the ability to wait a fair amount of time to be proven right or wrong.  I think eventually, the mood of the market will change.  Eventually, the company will be called into account to demonstrate profitability.  I don't know when that will happen.  And the portfolio's positioned properly relative
to the risk and the reward there.
It is just so dangerous to put valuation (as compared to fraud) shorts on in a bull market.
We have had a general rule, "Don't short Tesla" virtually since the IPO, that we've violated on three occasions, fortunately profitable but it is tough to tell if it was worth the risk.

The chart may be signaling an immediate-term reversal but we won't know for sure for a few days:

stock chart
 Chart via Nasdaq