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.
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