Seeking Alpha And David Einhorn: The Real Story

Includes: MU
by: SA Eli Hoffmann

Author's note: Please see below (paragraph 4-5) for an important retraction.

In November, a Seeking Alpha contributor who publishes under the pseudonym Valuable Insights published a series of StockTalks on Seeking Alpha in which he implied that Greenlight Capital - a hedge fund managed by David Einhorn - was in the process of building a position in Micron (NASDAQ:MU).

Greenlight petitioned the New York Supreme Court to compel us to disclose the contributor's identity. It claimed that Greenlight had not disclosed a position in Micron, but was indeed building a position, and had applied to the SEC for Confidential Treatment regarding its Micron stock. It claimed that disclosure of its position would materially impair or possibly eliminate Greenlight’s ability to successfully pursue its investment strategy, given that its activity in the investment markets is well known and closely watched by other traders.

We were about to file our opposition to this petition, but Greenlight dropped the suit of its own accord. We did not at any time disclose the author's identity formally or informally, and at no time were our actions dictated by reaching any sort of deal with Greenlight.

So why did they drop the case? It seems they were able to contact the author, who convinced Greenlight that he had built his thesis by joining the dots on publicly-available information.

Correction: We were and are not privy to Greenlight's discussions with Valuable Insights. What I wrote above was based on our understanding of their discussions, and was not idle speculation. However, I subsequently discussed this issue with David Einhorn who assures me that the author did not claim to have pieced the idea together from publicly available information. I therefore retract the above paragraph.

We're pleased this has ended. But given the appropriate opportunity, we will defend our position when challenged. This is not the first demand we have had to disclose pseudonymous authors' identities; we have yet to disclose author identity in any claim submitted to court.

Platforms such as Seeking Alpha are protected by Section 230 of the Communications Decency Act, which provides immunity from liability for providers and users of an "interactive computer service" who publish information provided by others. This doesn't stop attempts to file pre-action motions to try to get to specific posters, but so far our experience has been that the claims get shut down or withdrawn.

Will this experience impact our policy? In a word: No. We continue to support third-party contributors and their decision as to whether to publish under real or assumed names. We will continue to step in to the extent we deem reasonable against claims submitted, because we believe in the value that pseudonymity builds for the community.

You can read more about our support of author pseudonymity in this article that I published last week, in which I also explain the important steps Seeking Alpha takes to verify authors' true identities and to prevent them from using Seeking Alpha to manipulate stock prices.