Einhorn attacks Elon Musk and regulators over 'quasi-anarchy'
By Sean Farrell
Date: Friday 16 Apr 2021
(Sharecast News) - David Einhorn, one of the US's most prominent hedge fund managers, has attacked US regulators for letting Elon Musk do what he wants and allowing "quasi-anarchy" in markets.
Einhorn, president of Greenlight Capital, said it was healthy for people to debate the value of stocks if they follow the rules about fraud and manipulation. Keith Gill, the retail trader who sparked frantic trading in GameStop, made a "great call", Einhorn said in his letter to investors.
But he criticised regulators for weak or no enforcement of market rules in a year when "strange things happened to all kinds of stocks". GameStop's shares surged 2,000% in January as day traders organised online to push up the shares and hurt hedge funds holding short positions on the company.
"For the most part there is no cop on the beat," Einhorn wrote. "It's as if there are no financial fraud prosecutors; companies and managements that are emboldened enough to engage in malfeasance have little to fear."
Einhorn also criticised Musk, the boss of Tesla, for pouring "jet fuel" on the GameStop short squeeze by tweeting "Gamestonk!" but said ultimately regulators were to blame.
"If regulators wanted Elon Musk to stop manipulating stocks they should have done so with more than a light slap on the wrist when they accused him of manipulating Tesla's shares in 2018," Einhorn said. "The laws don't apply to him and he can do whatever he wants."
Einhorn also criticised US lawmakers for leaving regulators unable to police markets properly because of lack of funding.
"Many who would never support defunding the police have supported - and for all intents and purposes have succeeded - in almost completely defanging, if not defunding, the regulators. For the most part, quasi-anarchy appears to rule in the markets."
Einhorn's funds returned -0.1% in the first quarter compared with a 6.2% gain for the S&P 500 index. His value selections have performed badly but he said a shift was now happening and that most of his long investments performed well.
One of his worst bets has been a short position in Tesla and Greenlight's short portfolio dragged down performance in the first quarter.
"The performance of our short portfolio in 2020 and in early 2021 was unacceptable, so change is certainly needed, Einhorn wrote. "If we swing a little less hard, we should hit more balls. We have also revised our internal analyst incentive structure."
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