Greenlight Asked S.E.C. for Delay on Disclosure of Micron Stake

David Einhorn, the billionaire hedge fund manager whose stock picks are closely watched on Wall Street, is not a big fan of so-called copycat traders who simply latch onto his ideas — especially when it costs his investors money.

Last November, in a previously undisclosed letter to the Securities and Exchange Commission, Mr. Einhorn asked for a seven-day delay in disclosing that his fund, Greenlight Capital, was amassing a stake of 47 million shares in Micron Technology, which makes memory chips.

Mr. Einhorn’s firm said it needed to keep its buying secret — and kept out of a regular quarterly report that most money managers file with the agency — to prevent a surge in Micron shares.

“Mirror trading by ‘copycats’ could lead to unwarranted volatility and inflated prices in the security,” a representative for Mr. Einhorn’s firm wrote in the Nov. 14, 2013, letter, which was obtained through a Freedom of Information Act request.

Mr. Einhorn’s request to the S.E.C. for confidential treatment illustrates the zealous approach some managers in the $2.7 trillion hedge fund industry take when it comes to keeping their trading positions out of the public eye. But it also reflects the risk that can come with being a money manager like Mr. Einhorn, who has cultivated press coverage over the years when it suits his interests.

In support of its request, Greenlight attached several news articles describing how prices of stocks often rise or fall sharply on reports that Mr. Einhorn’s firm is either buying them or betting that they will fall. The firm, which has $10 billion in assets under management, offered the articles as proof that a premature disclosure of its buying strategy on Micron would cause “substantial” financial harm to its investors because the hedge fund intended to keep accumulating shares for at least another week.

The regulatory filing for which Mr. Einhorn requested confidential treatment is called a Form 13F. It is filed 45 days after the end of a quarter to provide the investing public with a snapshot of a manager’s holdings of United States stocks. The S.E.C. seldom grants requests by investment managers for confidential treatment, but because it can take weeks, or even months, for a request to be reviewed, a manager gets the benefit of the doubt to keep a position secret simply by asking regulators to consider it.

The 10-page letter, portions of which were redacted by the S.E.C., glosses over the fact that Mr. Einhorn has never been shy about speaking about his firm’s stock holdings at charitable events and conference calls — as he did on a call last year when Greenlight proposed that Apple use some of its $137 billion cash reserve to issue a dividend-paying preferred class of stock.

The redacted letter does not mention that the seven-day window of secrecy was set to expire on the same day that Mr. Einhorn planned to appear at a charitable event in New York City where he was supposed to unveil his “best” investing idea. It was at that Nov. 21 investors conference, sponsored by the nonprofit Robin Hood Foundation, where Mr. Einhorn first disclosed that his fund had taken a big equity stake in Micron.

Mr. Einhorn’s presentation, giving a bullish case for Micron’s stock, caused a big splash at the event, which was attended by other prominent hedge fund managers. On the same day Mr. Einhorn spoke at the Robin Hood conference — he is the foundation’s vice chairman — he also appeared on the cable business channel CNBC to discuss his views on Micron.

By the close of trading on Nov. 21, shares of Micron had jumped 6 percent, with most news outlets crediting Mr. Einhorn, 45, with pushing the shares higher.

Paul G. Hodgson, a principal at BHJ Partners, a corporate governance consulting firm, said money managers like Mr. Einhorn were taking advantage of what he called a “loophole” that has long existed in the confidential treatment process that enables them to keep positions secret until the S.E.C. decides on the request. He said managers might be less inclined to take advantage of the loophole if the S.E.C. moved faster in reviewing requests.

“It is a little hypocritical of money managers to exploit that loophole because they want press attention when it serves their interests,” Mr. Hodgson said.

The S.E.C. declined to comment on Greenlight’s confidential treatment request.

Last fall, the S.E.C. issued guidance to money managers advising them that requests for confidential treatment “should demonstrate the likelihood of substantial harm” and provide specific examples.

Jay G. Baris, a partner in New York with the law firm Morrison & Foerster, said that in recent years the S.E.C. had become “much more sensitive” about requests for confidential treatment from money managers, but he added, “there are legitimate reasons to request confidentiality.”

Jonathan Gasthalter, a Greenlight spokesman, declined to comment. But Mr. Gasthalter pointed to a comment made a year ago by Mr. Einhorn in which the money manager cautioned investors to do their own work and not “blindly follow me or anyone else into a stock.”

Mr. Einhorn’s request to the S.E.C. for confidential treatment probably would have gone unnoticed if not for a lawsuit he filed earlier this year to learn the identity of an anonymous blogger on the financial website Seeking Alpha, who wrote a post last November suggesting Greenlight was taking a big stake in Micron. The post was published the same day that Greenlight sent its letter to the S.E.C. seeking confidential treatment.

In March, Mr. Einhorn’s firm dropped the suit after it said it had learned the identity of the blogger, and presumably the person who leaked the information about Micron. The identity of the blogger, known as Valuable Insights, has not been made public.

Greenlight’s investment in Micron has proved to be one of Mr. Einhorn’s better performing trades. Shares of Micron are up 32 percent since Mr. Einhorn’s presentation at the Robin Hood conference.

On Monday, Mr. Einhorn, whose fund is up 3.2 percent for the year, will once again take to a public forum to present some of his best investing ideas. He is scheduled to speak at another annual charitable event, held by the Sohn Conference Foundation, during which top money managers present their best ideas to a crowd of wealthy investors who pay thousands of dollars to attend. Other speakers at the Sohn conference will include the money managers William A. Ackman, Jeffrey Gundlach and Paul Tudor Jones II, founder of the Robin Hood Foundation.

The Sohn conference, which raises money for pediatric cancer treatments and is named after the hedge fund trader Ira Sohn, who died of cancer at 29, is one of the signature events for hedge fund managers to present their best trading ideas.

In 2008, Mr. Einhorn rocketed to hedge fund stardom when he used the conference to take on Lehman Brothers and criticize its accounting practices — months before the firm collapsed at the height of the financial crisis. In December 2012, at a special Sohn conference, Mr. Ackman unveiled his $1 billion short position on the nutritional supplement manufacturer Herbalife, which has made headlines for the last 18 months.

“I guess it is all playing the press. They all do it,” said Mr. Hodgson, commenting on hedge fund managers going public with their trades. “It is their modus operandi, and it tends to be very effective.”