Greenlight’s Einhorn Exits GM, Doubts Tesla Board’s Independence

(Bloomberg) -- Hedge fund manager David Einhorn summed up a five-year investment in General Motors Co. as “a disappointment” and criticized Tesla Inc. for the second time in as many days.

Greenlight Capital exited GM because the coronavirus pandemic has eliminated any chance the carmaker will do a minimal share repurchase this year, Einhorn wrote in a letter to investors Friday. A costly 40-day labor strike last year consumed most of the cash flow the automaker would have otherwise generated, he said.

“Our hopes that 2020 would finally be the year were dashed,” Einhorn, 51, said of his reaction to GM's investor day in February. The Detroit-based company's shares fell 6.2% on Friday and have plunged 43% this year.

Einhorn said Greenlight has limited losses from betting against Tesla by using put spreads to short the electric-car maker. He wrote that Tesla's accounts receivables “remain a source of mystery” a day after questioning Chief Executive Officer Elon Musk about the company's billing practices on Twitter.

Einhorn also blasted Tesla's board over an arrangement the company disclosed in a regulatory filing Tuesday. The company said it decided not to renew its directors' and officers' liability policy for 2019 and 2020 due to “disproportionately high” premiums quoted by insurers. Musk, 48, instead agreed to personally provide coverage for a year.

“This creates an obvious conflict of interest that cripples the directors' ability to curtail Musk's behavior -- as he can now threaten that if the board brought him down, the insurance may not have value,” Einhorn wrote. “Making the directors so beholden to Musk by definition makes them not independent.”

Tesla said in its filing earlier this week that its board had concluded the arrangement with its CEO would not impair the independent judgment of his fellow directors.

Hours after Einhorn sent out his letter, Musk sent out more than a dozen tweets in a span of less than a 75 minutes that sent Tesla shares plunging. The stock closed down 10% after the CEO wrote that it was trading too high. He wrote later that he is optimistic about the company in the long term.