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Einhorn Notes Tech Bubble As King Digital IPO Lingers

Could the top in the tech market be marked by the Candy Crush-maker IPO?  “Now there is a clear consensus that we are witnessing our second tech bubble in 15 years,” David Einhorn’s Greenlight Capital said in an investor letter Tuesday, first reported on “What is uncertain is how much further the bubble can expand, and what might pop it.”

Einhorn Notes Tech Bubble As King Digital IPO Lingers

“Current bubble echo of previous bubble”

The King Digital Entertainment PLC (NYSE:KING) IPO is marked by the Internet game maker’s lack of clear revenue prospects and mixed potential, yet it garnered an initial company valuation of $7.6 billion. It is this type of speculative froth that could be concerning Einhorn when he writes: “The current bubble is an echo of the previous tech bubble, but with fewer large capitalization stocks and much less public enthusiasm.”  Einhorn also expressed concern with rapid appreciation in the first day following a tech stock’s initial offering.

The Einhorn magic touch extended to retailer Conn’s, which was up near 9% on the news of Einhorn picking up the company in his portfolio, as well as solar plant company Sunedison Inc (NYSE:SUNE), which was up 8% on the Einhorn news.

The largest winner in the portfolio, according to the letter, was long exposure to Micron Technology.

Difficulty with shorts

Einhorn’s magic didn’t extend to Chipotle Mexican Grill, Inc. (NYSE:CMG), however, as he closed his short position, which had rocketed from $400 per share to trade near a high of $600 per share after his position was first announced. Other losing shorts the fund closed were Fortescue Metals Group Limited (ASX:FMG), Loblaw Companies Limited (TSE:L) and Michael Kors Holdings Ltd (NYSE:KORS). Einhorn had difficulty with shorts, as his most significant loser was Green Mountain Coffee Roasters, a short position.

The firm’s largest long positions at the end of March were Alpha Bank, Apple Inc. (NASDAQ:AAPL), gold, Marvell Technology Group Ltd. (NASDAQ:MRVL), and Micron Technology, Inc. (NASDAQ:MU).

Greenlight Capital 1Q14 letter (1)

Green Light 2014 Letter by ValueWalk