Greenlight Capital CEO David Einhorn presented his short thesis for athenahealth at the Grants Investment Conference last week, and the most eye-popping slide is a video clip of the athenahealth’s CEO explaining how he calculates its growth expectations.
“‘Well how did you get to your 30% organic growth?’,” athenahealth CEO Jonathan Bush said to a panel of laughing listeners. “I said I dunno. I got it out of my arse.”
Einhorn has been publicly short athenahealth since May of 2014. In last week’s presentation, he covered a wide range of topics — from monetary policy to European debt — but really dug into what’s going on at the medical records company.
We’ve included that part of the slide deck here.
“At the Ira Sohn conference last year, we allowed relatively generous assumptions in the base case DCF, which valued athena at $US50 per share,” Einhorn said in closing. “Back then, we weren’t forecasting a big slowdown in enterprise bookings, massive increases in capitalised research and development propping up the income statement, or Epic entering the cloud. As it stands now, we think athena’s business performance is tracking closer to our bear case valuation of $US14 per share. We continue to expect the athena stock bubble to pop.”
'Essentially we see it as a business process out sourcer, with a very promotional CEO,' Einhorn wrote of athenahealth CEO Jonathan Bush.
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'Like many companies, athena has learned that if Wall Street counts cash compensation but not stock comp, it may as well pay its people in as much stock as possible.'
'athena tells investors to ignore current profits because it needs to invest to maximise its growth opportunity.'
'We grow on average 30% a year,' Bush said in this interview. 'I think the clinical term for that is it doesn't suck.'
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'athena might cheer 30% enterprise bookings growth, but that won't even take it back to its 2011 level.' Einhorn wrote.
'What I said last year was... 'Well how did you get to your 30% organic growth?' I said I dunno. I got it out of my arse,' says athenahealth CEO Jonathan Bush in this video.
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''So this is the key. We're not going to develop a system to take them on,' Bush said when questioned about his competition. 'We are building a network.'
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'I don't know what we're worth... I know we're worth $1,000 a share, no problem, sometime in the future,' Bush old Bloomberg TV.
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