When David Einhorn Talks, Markets Listen—Usually

It was shaping up as an especially good episode of The David Einhorn Show. The founder of the $8.8 billion hedge fund Greenlight Capital was speaking in May 2012 at his favorite venue, the Ira W. Sohn Investment Research Conference, held that year at New York’s Lincoln Center, to a packed audience of money managers eager to hear which stocks were in his cross hairs. Thin, mild, diligent, and looking, at 44, like he could still get carded for beer, Einhorn is renowned for his fearlessness. Not simply for the boldness of his calls, but his embrace of the dull and unglamorous work that others simply won’t do. Since launching his fund in 1996, he has been right so often and, occasionally, against such high odds, that his public positions are the closest thing in finance to self-fulfilling prophecies. When he names a target out loud, in his nasal, Wisconsin-tinged voice, it’s like jolting the company with a cattle prod.

All speech long, Einhorn was getting the electric response he’s accustomed to. He criticized Martin Marietta Materials, a construction company: The stock lost 14 percent in eight minutes. He identified a threat to Dick’s Sporting Goods: The retailer shed 6 percent in three. The professional investors in the audience and the financial journalists live-blogging and tweeting Einhorn’s every remark even paid attention to what he didn’t say. By neglecting to mention Herbalife—a marketer of nutritional supplements whose stock he had single-handedly caused to plummet two weeks prior—Einhorn caused its shares to soar. The fund manager jokingly pulled a wand from his pocket and chanted a spell. The Einhorn magic was in full effect.