Jim Simons Lost $50 Million Because of David Einhorn’s Question

Jim Simons’ Renaissance Technologies had nearly 3 million shares of Herbalife (HLF) at the end of December. The fund was quite bullish about the stock and incrased its holdings by more than 50% during the fourth quarter. Unfortunately Herbalife lost more then $16 per share since David Einhorn asked a few critical questions about Herbalife’s reporting. Investors took this as a sign that Einhorn is shorting the stock. Jim Simons’ Renaissance lost nearly $50 million since David Einhorn’s questions. Luckily the stock is still up around 5% YTD.

Steven Richman’s East Side Capital, Ken Heebner, Patrick McCormack, and billionaires Steven Cohen and Ken Griffin are among “Einhorn’s victims”. If I were David Einhorn, I would initiate large put option positions at high P/E stocks right before their earnings announcement and then ask a “smart” question during the company’s earnings call. This is excellent way of generating excess returns as well as a deterrent for front runners.