David Einhorn: He's Here, He's There, He's Everywhere

" This a fast life we are on a crash course

What you think I rap for, to push a fucking Rav 4?"

- Jay-Z

Hedge Fund manager and CEO of Greenlight Capital, David Einhorn can do it all. How do I know this? Because the first time I saw him he was bluffing people left and right and taking their money on the poker felt, just as he does during his day job. In the summer of 2006, Einhorn entered the World Series of Poker main event tournament held annually in Las Vegas and 8000 people later, he finished in 18th place, collecting a meager $660,000. He obviously didn't need the money, so it ended up going towards a couple charities, one of which is Michael J. Fox's.

Einhorn, who criticized Lehman Brothers a couple months before their epic collapse in 2008, has been making news again several times during the month of May, and for different reasons. During the first week of May, Einhorn disclosed a position his hedge fund was making on Yahoo! shares, pricing Yahoo! at $16.93. Remember those guys? Well they've been slowly falling by the waist-side for nearly a decade until finally some positive words were spoken by Einhorn. Why so bullish on Yahoo!? Because of its alleged 40% stake in Alibaba, the Ebay of China. Yahoo! shares surged 3% after this report got out. Einhorn mentioned how Yahoo's stake in Alibaba could be almost as large as Yahoo's whole market cap, which is currently sitting at $21 billion.

Two weeks later after Yahoo's SEC report came out, it turns out their stake in Alibaba isn't so lucrative after all, why? Yahoo said that Alibaba did some things behind the scenes without telling shareholders and board directors, and Alibaba said Yahoo! doesn't own 40% of them. Yahoo's stake in Alibaba was lucrative because of Alipay, a PayPal like system that apparently became a separate company from Alibaba sometime last year, without telling Yahoo! (or so says CEO Carol Bartz). For the past month, Yahoo! and Alibaba, under the leadership of English teacher turned millionaire CEO Jack Ma, have been taking jabs at one another going back and forth between who said what when. After this extremely unprofessional dispute brokeout, Yahoo's shares then tumbled 8% and shareholders and investors alike, were calling for Bartz's head.

"It's all about the he said she said bullshit," once sang Limp Bizkit lead singer Fred Durst. No one knows for certain yet who's telling the truth, but there's a lot of money in Chinese internet companies (Baidu and RenRen both went public this year) and that was the main reason Einhorn was so bullish on Yahoo's stock. On Wednesday, Einhorn made it clear at the Ira Sohn Conference (where people pay money for charity in exchange for expert opinion's on which stocks are hot, the current economy, etc.) that it's time for Microsoft CEO Steve Ballmer to step down. He related it to a moment when he was playing football with his friends (at Cornell) thirty some years ago and he knew he needed to step down from being quarterback and give someone else a shot.

Really? he's using that example in comparison to what the CEO of one of the greatest tech companies in history should do? As of March 31st, Einhorn has 1.39 million shares of Microsoft stock, equivalent to $230.2 million in cash. How seriously are we to take Einhorn's opinion here? Only a week after his alleged lobbying for Yahoo! stock, Yahoo stocks surged southward after the Alibaba dispute made headlines. I think Ballmer's $8.5 billion acquisition of Skype was a very important one and could propel Microsoft to the top of an untapped market, video calling. They can implement Skype into other products that are already doing well for them, namely Xbox Kinect. The Windows Phone, which came out two years too late, is lagging far behind Android, Apple, and even Blackberry. This may push them into the conversation with those competitors.

And today, Einhorn announced he's trying to close a deal with the New York Mets. Einhorn will own roughly 49% of the team and it'll cost him close to $200 million. Talk about making headlines. Microsoft shares actually rose 2.3% after Einhorn's words. Has his Yahoo! misstep made investors skeptical? I believe so. It's too early to be calling for Ballmer's head. This is the first legitimate acquisition they've made the past 2-3 years and the best thing the company's done since their 1.5% stake in Facebook. Most importantly, they kept Skype away from its competitor, Google. The next six months should tell a lot about how Microsoft plans to integrate Skype into their products and whether it'll be successful to the extent that the Windows Phone becomes a hot commodity rather than an outlier.

From short selling to being a short stack on the poker felt, David Einhorn has been around the block more than once and when it comes to taking large risks, he's as good as it gets. His constant charity donations makes you question the "greed is good" quote that Michael Douglass once engrained in our heads. But so far this month, with both Yahoo and Microsoft, Einhorn has made his opinions heard loud and clear. If Yahoo's stake in Alibaba somehow gets back up to that 30-40% level AND Skype turns out to be the biggest bust in M&A history, then maybe Einhorn will look as smart as he is. But for now, he has a better chance on the Mets making the World Series than either Ballmer getting ousted or Jack Ma settling the dispute with Carol Bartz.

Russian Roulette or is Yandex the Real Deal?

"Lifestyles of the rich and famous, they're always complainin', always complainin."

Just three days after LinkedIn went public on the NYSE, "Russia's Google" or Yandex, went public on the Nasdaq in the most pricey internet offering since Google in 2004. What does that mean? Well the company raised $1.3 billion for the IPO and just like LinkedIn, it went from being valued at around $4-5 billion to $11 billion when all was said and done. Just a couple months ago we heard numerous reports about how private companies who were seeing success on the private market had no desire or were in no rush to go public, let's stop the bullshit. LinkedIn's IPO just opened the floodgates for a number of these so-called "satisfied being private" companies. Sarbanes-Oxley, cloud computing, blah blah blah. Going public is still the ultimate goal especially considering the interest in technology related companies.

But first, Yandex. Shares skyrocketed north of 55% on Tuesday, and the stock went from being priced at $25 at the beginning of the day to $38.84 by closing bell. Like LinkedIn, Yandex is profitable ($29 million last year) and has a net income of $134.3 million with a revenue of $439.7. Also like LinkedIn, Yandex isn't in its nascent stages or a company that just got VC funding last week. They've been around since 1997 under the leadership of CEO Arkady Volozh, a mathematician, and Ilya Segalovich, a geophysicist.

It's been awhile since the Russians had much to celebrate. They were the first to get to space, have had the best chess players, terrific writers, some talented hockey players and figure skaters, and now they've made their way into the new technology boom. Billionaire investor and entrepreneur Yuri Milner has been the center of attention the past couple years for his investments in Zynga and Facebook. His company DST Global (or Mail.Ru) now owns a 2% or $200 million stake in Facebook. He is one of the few people in Europe right now who gets IT and seemingly knows where to put his money-in Silicon Valley start-ups. Might come with being a Upenn graduate? Maybe. What I'm getting at here is that Russia/Eastern Europe is turning it around it terms of where they stand with innovation going forward. What venture capital giants Marc Andreeson and Ben Horowitz are to the US, Milner is to Russia. For every billionaire investor, we need brilliant entrepreneurs. Didn't Larry Page and Sergey Brin have physics backgrounds? Besides being older, these two Yandex guys have things in common with Google's bosses. It's a great thing for the country who's English speaking skills are clearly lacking, given Yandex's 60% market share in the country and its 270 million users. I also like this company because they've shown consistent revenue increases the past 3 years and they were established in '97, in the middle of the dot-com boom so they've been able to tweak their business model and technology to succeed now.

How do I know this "we don't need to go public" talk is overrated? Because Zynga just filed to IPO yesterday a year ahead of schedule. If LinkedIn and Yandex have had such succesful IPOs with a fraction of Zynga's $400 million profit in 2010, why shouldn't Zynga go public? It would be stupid not to given this "frothiness" in the market. Zynga, the maker of the Facebook game Farmville, Mafia Wars, and now Gagaville among many others, has been the social gaming leader for the past couple years. Facebook will not go away anytime soon, as a result, neither will Zynga. What will all the soccer moms do without Farmville? It's hard to imagine that world.

Look for Facebook and Groupon to be next in line for filing there IPOs sooner rather than later. Facebook is scheduled to go public April of 2012, but given the high interest in anything technology/internet related, they should get in NOW. Out of all the hot start-ups, Groupon is the one I have the least amount of faith in. Their business model, which mainly support small-businesses, can't be logical in the long-run for these companies, or can it? I think right now Groupon and LivingSocial are hot ideas to experiment with because the idea is new, it's something these restaurants have never tried-giving customers major discounts in hopes that they'll eat their food at a smaller price. Maybe it will continue to succeed 3-5 years down the road and I'll be proved wrong, but I don't think its sustainable for the sake of keeping these small businesses running or being profitable.

Let's Party (or run) Like It's 1999: Why LinkedIn's IPO is NOT the late 90s part II

"Every new beginning comes from some other beginning's end"

-Closing Time, Semisonic

In case you live under a rock or you died this past Saturday because of that whole

end of the world thing, LinkedIn (NYSE:LNKD) the online resume site-or as I like to call it Monsters.com meets Facebook-went public and lead to one of the craziest IPOs in recent era. Some, like CNBC magnate Jim Cramer, believe it was reminiscent of the dot-com boom when theglobe.com went public. In 1998 the company and its freshly minted Cornell graduates started selling at $8/share and eventually reached $94/share at one point during opening day. Two years later they were bankrupt, along with about ten to fifteen other dot-com start-ups, and the rest as they say is history.

LinkedIn has a chance to re-write history, as do their VC investors, their CEO, and everyone involved with this interesting social-media company. LinkedIn, unlike Facebook, Groupon, or Zynga, did not get much publicity two weeks to two months prior to the IPO, until that IPO finally came and the financial world seemed to blowup. Both from an investor standpoint-where the company's shares were supposed to open Thursday trading in the $25-32 range (reached as high as $121.97 and closed at $94.25)-and from the bubble talk standpoint. Private trading outlets like SecondMarket and SharesPost have been home to many of these private companies. Including many you probably haven't heard of but are doing well like Etsy, Yelp, and Gilt Groupe. But those who had access to these exclusive (and potentially reclusive) outlets were primarily the VC investors themselves who wanted to buy and sell shares of the company's they stake (or individuals who have $1mil in assets or make at least $250,000 a year).

Point being, just because LinkedIn, a company which was valued around $3 billion on the private market, ended up getting a valuation of roughly $9 billion on the public market, doesn't mean there's a bubble. It's no Pets.com or Webvan. Those were two dot-com companies in the late 90s that went public and then bust two years later. They had nice IPO openers as well. But what they did NOT have was a concrete business model. Pets.com had incredulous debts to pay because they were spending so much on delivery and supplies and not enough demand. The idea was cool for like two weeks, nothing more. Webvan tried 30 minute grocery food delivery to your front door, what they didn't think about was that people would want food delivered to their houses at night. Webvan spent $1 billion on gathering various business needs to keep them running while their profits and revenues were inching closer and closer to the negatives.

LinkedIn, ladies and gentleman, was profitable last year for the first time with a yearly profit margin of %6.32. And, revenues are expected to increase for the third straight year by a substantial margin. From 2009 to 2010 the company went from $123 to $243 million and is expected to be in the $400-500 million range after this year. Oh, and they've been around for eight years. Reid Hoffman their co-founder is the real deal. Having lived through the dot-com boom and come out having a piece of one of the biggest companies in PayPal, Mr. Hoffman knows a thing or two about building multi-billion dollar businesses.

Moreover, LinkedIn has a legitimate business/revenue model. 45% of their business comes from recruiters, companies, or head hunters as some may call them, setting up shop on the site to search for qualified job candidates. An online resume that was easy to access without all the PDFs and downloads and email sending hoopla, what brilliance! If you look up the word "networking" in the dictionary, you should see LinkedIn there. What better place to meet former classmates, get in touch with recruiters or employees of a company your interested in, or find about new job opportunities? You can do that contacting employee thing on Facebook too I guess, but that's a bit more creepy and a bit less professional. Another 35% of the business comes from display and text advertising, something they can still improve on. And the last 20% comes from premium subscriptions.

So, what has caused this gi-normous valuation for a company which was approximately the 5th or 6th most popular on the SecondMarket?

Two things:

1. SecondMarket/SharesPost

2. Innovation/Maturity

SecondMarket has been in the news for the past six months at least three to five times a week in just about every major news outlet. From Bloomberg to the WSJ to the NY Times, you get the point. All this hype around private companies being valued at $85 billion (Facebook) and $25 billion (Groupon) has made investors both antsy and hungry to pounce on the next internet company to go public. Sorry, the next social media company to go public. The hype around social-media sites was evident when "the Facebook-of-China" went public aka RenRen a couple weeks ago on the NYSE. It's shares soared 28.6% on opening day and ended the day trading around $18, above its starting $14.

LinkedIn has 100 million users, one-sixth the amount of Facebook users, but it's

been growing both financially and now technologically with the recent money they made in the IPO. They don't NEED the money, but it's nice to have when they decide to make an acquisition to help propel them even further along the social resume food chain. Remember Monsters.com? Yeah well they're still around, but I wouldn't be surprised to see LinkedIn buy them up in the near future.

The #2 reason why LinkedIn's shares blew up faster than Andy Roddick (after the umpire makes a "bad" call) is because of innovation and maturity. Innovation from a technological standpoint: programmers and investors have come a long way since the dot-com boom. As a result, they have matured and grown from their previous start-up failures to become a lot more intelligent with how they use money and how they assess which type of company or market will be successful next. Fifteen years ago there were barely any metrics to calculate how well these internet companies were doing private or public. Now there are various different revenue outlets and metrics. Moreover, Wi-fi didn't exist fifteen years ago and the most popular type of internet was dial-up. Labtops weren't around, desktops weren't as powerful, and tablets like the Ipad and Xoom (lol) were nowhere to be seen. Aside from Minority Report that is.

We are clearly going through a social boom where privacy is the last thing people are worried about. Pictures of our friends (and sometimes us) hooking up with their girlfriends, our online work experience and GPA, and letting people know where we are and what we're doing at least three times a day. Privacy you say? What started out as AOL chat rooms, email, has evolved into Facebook. I can't imagine what Facebook's valuation will be when it goes public next year but let's just say that $85 billion valuation on SecondMarket isn't a bad guess. Remember that Facebook has 600 million users and $400 million in profit, not revenue. That.is.big.time

Wrapping up, LinkedIn is run by some very smart people including the aforementioned Reid Hoffman and CEO Jeff Weiner. Silicon Valley is booming with talent and thanks to the internet and creativity people are getting smarter at a much faster pace. What would we do without the internet? The internet was in the early stages of the monster it has become today. To quote Gilt Groupe CEO Kevin Ryan: "When you see companies being valued at 10x their revenues, that's a bubble." I couldnt' agree more. What this is NOT, is the end or near the end of the tech-boom. LinkedIn has a great business model, a large user base, and it's profitable. The dot-com bubble and eventual bust was caused by ridiculous companies going public and then going bankrupt two months to two years later because they just wanted a ticket to the party, not a ticket to get invited back year after year. The companies you'll see go public in the next 2-5 years won't all be successful in the long run but some like Facebook or Zynga, may be mainstays for several decades to come.

Next topic: Why Microsoft & Skype are like peas and carrots.