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Einhorn Withdraws Case Against Blogger Who Revealed Holdings. Is Anonymity Good?


In an interesting test of the anonymity of the internet, Hedge fund manager David Einhorn first demanded to know the identity of a blogger that revealed his holdings early, and eventually dropped the case.

Einhorn, who runs Greenlight Capital, had been buying Micron Technology (NASDAQ: MU). But his holdings were not yet public. A blogger on Seeking Alpha, named “Valuable Insights” posted a note saying a Major Hedge Fund would be purchasing shares of MU. Someone in the comments asked if it was Einhorn. And the poster replied it was. That then pushed up the price of MU and it seems Greenlight had to pay a much higher amount to purchase shares.

Greenlight had then petitioned Seeking Alpha to reveal the name of the blogger, who is an anonymous independent contributor and not employed by Seeking Alpha. SA refused, obviously, because it would endanger its own future as a source of information.

Meanwhile Greenlight kept saying the information was revealed by someone who was legally not allowed to reveal it (either because he’s a broker or has a fiduciary role or has a non-disclosure agreement), so they wanted to follow up legally.

Eventually they found the name of the blogger and have found, in discussions with him, that the information was gleaned from the public domain and no transgressions were found. Greenlight dropped the case.

This eventually has ramifications for anonymous writing. We should support it because otherwise people will attack you, like IndiaBulls has, in suing Veritas and Nitin Mangal for extortion and defamation when they wrote a negative report against the company. Nitin Mangal has been subjected to 100 hours of grilling by the Mumbai police. It is obvious that when the rich people take to action that results in extensive abuse, even if legal, then people will want to reveal the truth only anonymously.

However, the new brand of anonymous writers have decided that they can throw allegations around that outrage people – saying the Mr. X has done this or Mr. Y has done that – without having to really back themselves up with evidence. This also amounts to abuse. There’s a grey area here, but it really calls for discipline on both ends, and to discourage such abuse both by companies who want to restrict free speech and also abusers whose only motive is to defame people without evidence while hiding in that anonymity cloak.

What Greenlight has done is commendable – even though they lost money, they didn’t sue because the information was provably in the public domain. The generic Indian company in this case would have sued anyhow, forcing the writer to come to court and be subject to police questions and worse, have his computers confiscated.

We’ll have to find ways to protect those that reveal the truth, but punish those that tell us lies to outrage us. How? What would you do?


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