Greenlight Capital's David Einhorn Is Short Athenahealth -- Update

By Dow Jones Business News, 
A A A


By WSJ Roundup

Greenlight Capital Inc.'s David Einhorn said he's betting against athenahealth Inc. ( ATHN ), noting the stock could drop 80% or more from its recent high because it is "caught up in a bubble."

Athenahealth shares dropped about 7% to about $118 in after-hours trading. Mr. Einhorn's made his comments at the Sohn Investment Conference in New York. The stock, which closed Monday at $126.78, is up 275% over the past five years and has risen 46% over the past 12 months.

Mr. Einhorn last month warned that the market was witnessing its second tech bubble in 15 years. At that time he said he was shorting, or betting against, a handful of these bubble stocks but didn't specify which ones.

Monday, he said that athenahealth, a provider of electronic healthcare records, was one of those "bubble stocks."

"We believe there are serious risks to the business model mostly ignored by bullish investors and sell-side analysts," he said. "The thing about bubble stocks is the best reason to own them is because they are going up," Mr. Einhorn added. "When they stop going up, these stocks become falling knives."

Athenahealth, based in Watertown, Mass., wasn't immediately available for comment.

Though the company is often grouped along with technology and cloud-computing stocks, Mr. Einhorn compared it to business outsourcing companies given its main role is outsourcing "mundane" tasks such as bill collection and data storage. And even while crediting it as being a "more efficient" outsourcing company, he said the stock market is attempting to put cloud-computing-like valuations on athenahealth.

In Mr. Einhorn's presentation, he showcased numerous videos of athenahealth CEO and co-founder Jonathan Bush, who is related to the Bush political dynasty. The videos poked fun at Mr. Bush calling athenahealth a cloud-based servicer. The videos are full of "buzz words," Mr. Einhorn said.

Athena "isn't positioned to succeed the way bulls hope," Mr. Einhorn said. "It is caught up in a bubble and could easily fall 80% or more."

He added: "There will always be high-risk, low-margin things to do that will make healthcare better. Shareholders might want to consider the ramifications of the misallocation of capital."

Mr. Einhorn pointed to privately held healthcare software firm Epic Systems as an "undisputed winner from the fragmented IT market." He highlighted a major win for Epic when a division of CVS Caremark Corp. ( CVS ) announced plans earlier this year to use the firm's electronic medical record system, transitioning from the proprietary system the drug store-chain used previously.

"Epic's dominance will only grow," Mr. Einhorn said.

--Steven Russolillo, David Benoit, Juliet Chung and Sarah Krouse contributed to this article.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


  (END) Dow Jones Newswires
  05-05-141845ET
  Copyright (c) 2014 Dow Jones & Company, Inc.


This article appears in: News Headlines

Referenced Stocks: ATHN , CVS

Dow Jones Business News


More from Dow Jones Business News:

Related Videos

Stocks

Referenced

100%
100%

Most Active by Volume

110,219,031
  • $6.79 ▲ 14.31%
104,982,008
  • $11.83 ▲ 12.35%
95,065,355
  • $3.40 ▲ 0.59%
79,694,763
  • $36.59 ▲ 2.64%
49,037,292
  • $39.90 ▲ 5.81%
47,069,528
  • $15.34 ▼ 1.03%
43,387,835
  • $6.56 ▼ 1.94%
42,066,487
  • $98.38 ▼ 0.65%
As of 7/29/2014, 04:04 PM