Einhorn Predicts Tech Bubble About to Pop

April 24, 2014 James Heinsman Hedge Fund News

David Einhorn, head of the $10.3 billion hedge fund Greenlight Capital, is betting that a group of technology stocks based on what he says is increasing evidence that a bubble is forming and about to burst.

“There is a clear consensus that we are witnessing our second tech bubble in 15 years,” the New York-based firm wrote to clients in a letter. “The current bubble is an echo of the previous tech bubble with fewer larger capitalization stocks and much less public enthusiasm.”

Since March 5, the date that the NASDAQ hit its highest point in almost 14 years, that composite index fell 4.4 percent. Last year’s best performers were the stocks with the biggest losses in recent days.

Greenlight pointed to IPOs of companies that have “done little more than use the right buzzwords and attract the right venture capital” to point out just how far the bubble has already progressed.

“Once again, certain ‘cool kid’ companies and the cheerleading analysts are pretending that compensation paid in equity isn’t an expense because it is ‘non-cash,’ ” Greenlight said in the letter.

Greenlight did not name names, but it did reveal that it was shorting a group of tech stocks because that will lower the potential of any single investment becoming too much of a loss.

David Einhorn, Greenlight Capital, technology bubble,

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