David Einhorn: Short on Tesla and Long on GM

Hedge fund manager David Einhorn has two of the most frustrating trades in the market: a long position in General Motors Co. and a short against Tesla Inc.

Both of Einhorn’s plays are in dire need of a catalyst. Despite record earnings, GM’s stock is no higher than its 2010 initial public offering price. And Tesla, which already burned through about half the cash it raised in the first quarter, is up more than 40 percent this year.

So he’s ratcheting up rhetoric on the two automakers. With Tesla, Einhorn has limited his aggression to a shot at its ever bullish shareholders, whom he calls “hypnotized” by Chief Executive Elon Musk. With GM, he’s grown far more aggressive, penning a new letter accusing management of being uninterested in making moves to lift the share price and launching a dedicated website that plugs his proxy battle with the Detroit automaker.

“We think GM stock is undervalued dramatically even in light of the risks of a cycle,” Einhorn said in an interview Thursday. “We don’t see why GM should sit by complacently with an inefficient capital structure while shareholders suffer.”

A slump in auto sales may be holding auto stocks like GM down, but Einhorn says he thinks management could be doing so much more with its $20.4 billion cash hoard to help investors.

Einhorn, whose Greenlight Capital owns 3.6 percent of GM, was equally tough in the letter he sent to shareholders May 3, in which he once again laid out his proposal to convert GM’s shares into two issues, a dividend stock and a capital-appreciation stock. The value of those shares would be between $42 and $60 per existing share, Einhorn calculates, compared to Friday’s close of $33.77.

In other words, Einhorn is frustrated, GM is annoyed and there will be plenty of sniping from both sides until June 6 when the vote takes place. But it’s not the only automaker stock where’s Einhorn needs a change in fortunes.

Einhorn said he also has a small short position in Tesla, which he said in an April 25 shareholder note was one of his biggest losers.

“The enthusiasm for Tesla and other bubble-basket stocks is reminiscent of the March 2000 dot-com bubble,” Einhorn said on Greenlight’s May 3 earnings call.

Source: Bloomberg

Jr Trader Petar Milanov

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