David Einhorn calls out Tesla ‘mania,’ teases new short positions, and says the tech bubble is already popping

• David Einhorn questioned Tesla’s stock rally, predicted a slump in tech stocks, and teased new short positions during Greenlight Capital Re’s earnings call this week.
• The reinsurer’s chairman said the Tesla buying frenzy, partly driven by a stock split and hopes for its inclusion in the S&P 500, was “emblematic of the mania surrounding a small universe of story and other tech stocks.”
• “It is our view that we are now in the early stages of the bubble popping,” the hedge-fund chief said. “As a result, we have shorted a basket of high-flying stocks and recent IPOs trading at excessive valuations.”
• Einhorn posted a 1.4% gain for Greenlight Capital Re’s investment portfolio last quarter, compared to a 8.9% return for the S&P 500 benchmark index.
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Investor David Einhorn called out Tesla’s breathless stock rally, predicted tech stocks will tumble, and announced new short positions during Greenlight Capital Re’s earnings call on Thursday.

Einhorn chairs the reinsurer’s board and manages its investment portfolio, which eked out a 1.4% gain last quarter — a fraction of the S&P 500’s 8.9% return over the same period.

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The fund’s short position in Tesla weighed on its performance, as the electric-vehicle group’s shares nearly doubled in value last quarter. Einhorn underscored the absurdity of retail investors piling into Tesla on the basis that it split its stock in August and seemed likely to secure a spot in the S&P 500.

“Market behavior like this is emblematic of the mania surrounding a small universe of story and other tech stocks,” he said on the call.

Einhorn also echoed his comments to Greenlight Capital’s shareholders last week. In his quarterly letter, the hedge fund’s founder and boss highlighted 10 signs that tech stocks are in a bubble and suggested the market may have peaked in early September.

“It is our view that we are now in the early stages of the bubble popping,” Einhorn said on the earnings call this week. “As a result, we have shorted a basket of high-flying stocks and recent IPOs trading at excessive valuations.”

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Greenlight Capital Re’s core reinsurance business also struggled last quarter. It weathered natural catastrophes such as Hurricane Laura and the North American wildfires, while also fielding pandemic-related claims.

The result was a net underwriting loss of $0.4 million, compared to a $2.6 million gain in the same period of 2019. That fueled a 57% year-on-year plunge in the company’s net income to $2.2 million.