Any old person can slam the ratings agencies and say they helped cause the bubble, but it’s another thing to step up and place a lot of your money where your mouth is.
David Einhorn, the feared investor who made a killing shorting Lehman Brothers, is now shorting Moody’s (MCO), whose largest shareholder is Warren Buffett.
Einhorn says the firm has no value, that nobody takes it seriously anymore and that it blew all its credibility with AIG (AIG).
Shares of the firm are off over 7%.
Reuters: Moody’s largest shareholder, Warren Buffett of Berkshire Hathaway Inc, has said he does not rely on credit ratings, Einhorn said.
Yet Einhorn noted equity investors still believe in the agencies. Moody’s shares trade at 19 times estimated earnings, he said, though he said the company has a negative net worth of $900 million.
Moody’s had long been a favourite among investors because the limited number of firms approved by the U.S. government to rate debt lets these firms generate fat profit margins. McGraw-Hill Cos Inc’s Standard & Poor’s and Fitch Ratings are Moody’s rivals.
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