Sunday, 31 July 2016
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Jan 24 2013 | 10:59am ET
Months before fellow activist William Ackman of Pershing Square Capital Management called nutritional supplements company Herbalife a "pyramid scheme," it was widely assumed that Greenlight Capital's David Einhorn would be the hedge fund manager who took down the company.
But after causing a flurry in May with a strongly-worded question during Herbalife's earnings call, Einhorn clammed up. He even specifically said in October that he would not offer a Herbalife thesis at a conference.
It turns out, however, that he was shorting Herbalife all along. Einhorn told investors at Greenlight's annual conference that the hedge fund had successfully bet against the company last year, The Wall Street Journal reports. Einhorn said that he closed out the short last year, meaning he avoided the roller-coaster ride that began with Ackman's attack and has continued as Herbalife fights back and other hedge fund managers, including Dan Loeb, who is long Herbalife, take sides.
Einhorn did not say how large a short he had on Herbalife or how much he had made. He also did not mention it in Tuesday's fourth-quarter wrap up for investors. But it was a bright spot in what Greenlight referred to in the letter as a "pedestrian" year; a rough quarter cut Greenlight's return for the year from double-digits to 7.9%.
And a bright spot among Greenlight's shorts, which were a disaster in the fourth quarter: The firm wrote that its average short rose 10% on the quarter, including a 74% surge for Green Mountain Coffee Roasters. On the long side, Greenlight was burned by a swoon in Apple shares.
"Our coffee was too hot, our apple was bruised, and our iron supplements didn't go down smoothly," Greenlight wrote.