David Einhorn Discusses Sprint $S in a Nov 7 Investor Letter

David Einhorn, the manager of the activist hedge fund Greenlight Capital, has a tendency to make waves. Einhorn knows his stuff and he is happy to explain his reasoning, especially to his investors. On November 7, he issued an investors’ letter that explained his thoughts on the firm’s investments. In Einhorn’s investor letter, he discusses several stocks specifically.

David Einhorn

David Einhorn on Sprint

One of the stocks that Einhorn discussed in detail was Sprint (S):

Sprint (S) shares fell from $5.39 to $3.04 in the quarter. First the company announced a disappointing quarterly result, driven by increased phone subsidies in an effort to achieve its targeted level of customers. From there, management went into an investor relations meltdown, hosting an investor day where S presented a capex-driven funding requirement over the next two years that was greater than it had previously communicated, and at the same time failed to explain how S would fund the additional investment. The company even managed to bungle the October announcement that it would finally offer the iPhone. Management is on the verge of losing the confidence of the financial markets.

Why David Einhorn isn’t Selling Out Sprint

David Einhorn isn’t walking away from the company just yet. In the letter, he explained:
We believe the business opportunity and asset values remain sufficient to justify holding the shares, and we wouldn’t be surprised if shareholders begin to agitate for significant strategic change. Given the heavy need to invest, the S opportunity may be better pursued by a new owner with a lower cost of capital.