Hedge fund manager David Einhorn said on Monday that his Greenlight Capital was betting Assured Guaranty’s stock will fall, sending shares of the bond insurer down as much as 6 percent in after-hours trading.
Einhorn, who is known to move stocks by simply opening his mouth, did not disappoint at the Sohn Investment Conference with this year’s presentation. The stock’s fall essentially wiped out its gains to date this year.
Einhorn called Assured Guaranty “a melting ice cube that is paying out the drops while it still can.”
New business coming into the company is not enough to offset the amortization of the portfolio, Einhorn said.
Assured Guaranty said it strongly disagree with Einhorn’s assertions.
“Einhorn’s analysis of Assured Guaranty fails to acknowledge the positive implications of our significant financial strength and strong operating performance, and demonstrates a fundamental lack of understanding of our business model and the municipal debt markets,” the company said.
Assured Guaranty is well reserved for its municipal exposures and does not face liquidity risks, it said in a statement.
Einhorn said one particular problem is the company’s exposure to bankrupt Puerto Rico, which was devastated by Hurricane Maria. But the company also has some $17 billion in exposure to Illinois. Puerto Rico might just be the tip of the iceberg of the company’s problems, he said.
Einhorn also noted that the administration’s overhaul of the tax code eliminated the advantage of advanced refundings, drying up another source of business.
Einhorn often unveils short bets where he thinks the stock price will fall and surged to fame 10 years ago with a call against Lehman Brothers only months before the bank collapsed.
(Reporting by Jennifer Ablan and Svea Herbst-Bayliss;Additional reporting by Philip George in Bengaluru; Editing by Rosalba O’Brien/Tom Brown/Gopakumar Warrier)
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