Micron Is Given The Green Light

Feb.16.14 | About: Micron Technology (MU)

During the 3rd quarter, David Einhorn's Greenlight Capital purchased 23 million shares of Micron (NASDAQ:MU) stock. Apparently this information was leaked before Greenlight wanted the information to be public.

According to Bloomberg Businesweek,

Hedge-fund manager David Einhorn's Greenlight Capital Inc. asked a court to order the website Seeking Alpha to identify a contributor who allegedly disclosed the fund's stake in Micron Technology Inc. before it was made public.

Greenlight said in a Nov. 25 filing with the U.S. Securities and Exchange Commission that it purchased 23 million shares of Boise, Idaho-based Micron, a maker of memory chips, in the third quarter. Eleven days earlier, Greenlight had disclosed the stake to the SEC and asked that the agency not publicly identify Micron as the investment in question.

A frequent contributor to the site, identified only as "Valuable Insights," revealed the investment in a post on Nov. 14, before Greenlight disclosed its position to the SEC, the investment manager said in a petition filed yesterday in New York State Supreme Court in Manhattan. The hedge fund said in the petition that the website post drove up its costs.

Then, according to Greenlight's fourth quarter SEC 13F filing:

David Einhorn's Greenlight Capital discloses it owned 47.6M Micron shares at the end of Q4. That's up from the 23M shares it owned in late November, and is good for a 4% stake in the memory giant.

Now Greenlight appears to be one of the top 10 owners of Micron stock.

So, Greenlight saw a great opportunity to purchase Micron stock at a great price given Micron's large potential for near term growth. In November they started quietly buying Micron stock. They wanted to continue to buy Micron stock before their purchasing plan was known to the world, so they asked the SEC to not disclose the purchase of Micron stock while they continued to buy Micron.

Greenlight, with their large ego, felt that divulging their purchases of Micron would drive up the stock price. Apparently, according to Greenlight, Micron would not have run-up in price as it did in December without the leak of Greenlight's purchase.

Then Greenlight continued to purchase Micron, even at the higher price (they could have just stopped buying). Then they filed the petition noted above.

It appears that the petition is little more than an effort to increase awareness that Greenlight sees a very bright future for Micron. Greenlight felt that the initial "leaked" information of Greenlight's purchase drove up the price of Micron, so now they want to make sure more people know about Greenlight's bullish purchase so the stock will go up even more and faster than it would otherwise.

Micron will go up regardless of Greenlight's "pump and dump" tactics. This cheap Greenlight stunt will do more long term damage than good, since it will tend to perpetuate the past cyclical nature of Micron. Micron management has been working hard to put the ups and downs of Micron in the past and keep the company on a consistent upward course.

Disclosure: I am long MU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.