Einhorn's Greenlight Buys Yelp, Takes Wager on Natural Gas

  • Hedge fund says mobile app company can double revenue by 2019
  • Greenlight's main hedge fund rose 3.1% in first four months

David Einhorn’s Greenlight Capital built a stake in Yelp Inc., betting that the mobile app company can double its revenue by 2019, according to a quarterly letter to investors.

“The stock has suffered due to missed expectations and anxiety about an upcoming negative documentary," the New York-based hedge fund wrote in the letter obtained by Bloomberg. Yelp shares, which had fallen 25 percent this year, jumped 5.2 percent in after-hours trading to $22.62 at 5:12 p.m. in New York after Bloomberg reported the news.

QuickTake Liquefied Natural Gas

Yelp is moving its sales force to cheaper locales and providing more reporting tools to customers, which will help it grow. The company could also be acquired if its board wanted a deal, Greenlight said in the letter.

The hedge fund said it took a stake in the company at an average price of $21.16 a share. Based on its peers’ valuations, the company could be worth $55 a share, Greenlight said.

Fund Performance

Greenlight’s main hedge fund rose 3.1 percent in the first four months of the year, beating both stock markets and its peers. The fund dropped 20.4 percent in 2015, Einhorn’s worst underperformance since he founded the firm in 1996.

Greenlight, which mostly makes wagers on stocks, has also taken a new macro trade: a bet that the price of natural gas will rise after a decline in drilling activity.

"The high cost of liquefying and transporting natural gas limits competition to North American sources," Greenlight said in the letter. “As existing wells deplete, supplies should fall."

The new macro wager echoes the firm’s bet on Consol Energy Inc., a coal and natural gas producer that was one of its most profitable positions in the first quarter.

The hedge fund firm said it was surprised by the collapse of solar company SunEdison Inc. into bankruptcy. “Obviously, we underestimated the fragility of the situation," Greenlight said in the letter, naming SunEdison as one of its largest losers. Last month, Einhorn’s firm disclosed that it had cut its SunEdison stake to 2.8 percent from 6.8 percent in January.

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