David Einhorn rapped a remix of Eminem’s hit “Lose Yourself” at Greenlight’s 30th anniversary party, but saved his best disses for SpaceX.
In the $5.3 billion firm’s second-quarter letter, seen by Business Insider and dated from the beginning of August, the IPO of Elon Musk’s rocket-meets-artificial-intelligence company was called “a marker that a speculative top is near.”
The letter congratulates investors who invested in the company during private fundraising rounds on their big win, but questions the massive valuation at which the company went public.
“We don’t know if it is best described as the meme-ification of the market at scale, the latest proof that the markets are ‘broken,’ a remarkable manipulation of the IPO process (including floating less than 5% of the company while persuading several index providers to grant early inclusion), or just another insult to value investing,” the letter reads.
Greenlight’s five-page letter is stuffed with personal news, firm updates, and market commentary. A picture of the firm’s staff at the 30th anniversary party in May appears up top, along with news that Einhorn proposed to his longtime girlfriend at the event.
A snippet of his Eminem rap — which the letter calls “The Greenlight Story” — ends the note: “Lose Yourself in the Greenlight the moment you own it, you better never let it go. You only get one shot. Do not miss your chance to grow. This opportunity comes once in a lifetime.”
The fund, however, lost money in the second quarter and is up just 1.9% through June on the year, thanks to losses in the firm’s macro book, which was stung by wrong-way bets on gold and US interest rates. The average hedge fund was up by more than 7% through the same stretch, according to industry data tracker PivotalPath.
SpaceX investor conversations and criticism
The longtime value investor is unsurprisingly critical of SpaceX’s valuation. Einhorn and Musk have butted heads before, as the former was once a loud skeptic of Tesla, shorting the stock and presenting on the position at conferences like Sohn.
His criticisms of SpaceX, however, are directed at the market, not the company. The letter cites a conversation with an unnamed investor in SpaceX who has “billions” invested in the company and told Greenlight that the company will generate $1 trillion in high-margin revenue.
“When we observed that $1 trillion would exceed the annual revenue of either Amazon or Walmart and asked him to support his claim, he offered no explanation and instead pivoted to a rant about short sellers,” the letter reads.
A footnote attached to the sentence included a Musk barb: “In fairness, this investor appears to be simply repeating Elon Musk’s forecast.”
Rating agencies are “perhaps demonstrating even more questionable behavior than the equity holders,” the letter states, by giving SpaceX an investment-grade rating despite its lack of positive cash flow.
“We can’t find any other examples of investment-grade ratings being awarded to a company with a multi-year forecast of negative free cash flow and no history of generating free cash flow,” the letter states.
The firm added five new equity positions to its book and closed out three long-standing bets last quarter.
The additions were: Comcast, building products company Fortune Brands Innovations, Saratoga water parent Primo Brands, PayPal, and auto parts maker Versigent. The manager sold its stakes in Greek utility Public Power Corp, oilfield equipment company Weatherford International, and Victoria’s Secret.
