Greenlight’s Einhorn Bursting Athenahealth’s Bubble

May 7, 2014 Marcus Black In the News

Given David Einhorn’s track record, it makes sense for listeners to pay attention when the founder and president of Greenlight Capital speaks.  Einhorn told investors at this year’s Sohn Investment Conference in New York to be wary of bets place on Athenahealth, a stock which has risen by 46 percent year of year and 275 percent in the last five years.
Calling the stock a “bubble”  on Monday, Einhorn said that savvy investors could expect Athenahealth to tumble by as much as 80 percent. The result of that statement helped bring down the price of Athenahealth by 12 percent by Tuesday morning.

“The thing about bubble stocks is the best reason to own them is because they are going up,” Einhorn said. “When they stop going up, these stocks become falling knives.”

The problem with Athenahealth, said Einhorn, is that it is being valued as a cloud computing tech business, but that is not really what this company does. It would be more accurate to characterize Athenahealth as a company that provides medical technology services. The company  is more like an ordinary business-to-business service provider, resembling an outsourcing or bill collection firm.

Investors are taking notice of Einhorn’s warning, considering the fact that at the 2008 addition of the Sohn Conference Einhorn announced his short bet against Lehman Brothers.

Athenahealth, David Einhorn, Greenlight Capital, technology bubble,

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