David Einhorn is up against the short seller who brought down Valeant

In his second quarter letter to investors, Greenlight Capital’s David Einhorn disclosed that he is long Chemours.

The stock is up 7% on the news.

Andrew Left, the short seller from Citron Research whose questions brought Valeant Pharmaceuticals to its knees last October, disclosed a short position in the company in June.

So we have ourselves a bit of a tiff here.

First, a little about Chemours. It’s a chemicals company that DuPont spinned off into its own company. Greenlight started buying it during the fourth quarter of 2015, right before its stock price fell to $3 a share in January (down from $16). Then it started to recover.

Left says the stock is a loser because a class-action lawsuit could bankrupt Chemours. He also said that the company is levered up too high and lacks the cash to pay for its defence.

From Left:

No one has an exact dollar figure yet on the extent of the liabilities of this debacle. While Chemours only accounts for $20 million of overhang on its balance sheet, most Wall Street analysts estimate the liability to fall more inline with the $500 million figure.

But we always hear the value $5 billion being thrown around by social activists like the “Keep Your Promises DuPont” campaign, which has pegged environmental costs just for Parkersburg WV at $1 billion. After speaking in depth with community activists, Citron believes that even $5 billion may be a low number…

Einhorn and Greenlight disagree. In his letter, Einhorn pointed out that the richer parent company, DuPont, is the defendent in this case, not Chemours.

And the letter threw a little shade at Left too.

“We inquired about the $5 billion estimate, and the author of the report acknowledged that there was no maths to justify the figure. After considerable work and engaging our own outside experts, who estimate the liability to be only several hundred million dollars, we believe CC’s [Chemours] debt and liability to be managable,” Einhorn wrote.

This should be fun to watch.

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