SEC Lawyer: “At the time that you made the speech, did you anticipate that your position on Allied would become so public, or was it your thought that you would give this speech, say what you thought about the company, and then that would sort of be it, and what would happen to the stock would happen to the stock?”
David Einhorn: “If you’re asking is did I feel that the reaction was much, much greater that I would have anticipated? The answer is yes.”
This story began when David Einhorn presented his most compelling investment idea at a charity conference for the Tomorrows Children’s Fund. The fund supports a hospital that treats kids with cancer. The charity raises money by hosting an annual investment research conference, where well-known investors share a few stock picks and pans with an audience that pays to attend the event. All proceeds go to the hospital. David was honored to speak at the 2002 conference but had never given a public speech to a large group of strangers. There were ten other speakers at the event and David spoke third to last. By the time he gave his speech about Allied Capital it was late in the afternoon. The market was closed for trading. After he detailed Allied’s problems, word spread about the speech, and the next morning the company’s stock was unable to open. David had no idea that his speech had just set off a firestorm that would take him on an unexpected journey. Here is the speech in its entirety.