The Most Dangerous Trade

Chapter 4Einhorn: Contrarian at the Gates

The crowd at the Marriott Marquis Hotel was on tenterhooks as David Einhorn stepped up to the podium.

It was the Value Investing Congress, and the president of Greenlight Capital had set off fireworks at the same conference three years earlier, in 2007, using his accounting insights to dissect dubious risk management practices at Lehman Brothers, among other firms. That ended spectacularly badly for the storied investment bank—less than a year later it filed for chapter 11, ushering in the 2008–2009 financial crisis and great recession that followed. Einhorn soon ascended to a sort of demigod status on Wall Street.

Now, as the clock ticked toward noon on a cool October morning in 2010, the thin, boyish-looking Einhorn was set to unveil a new target—one that could mean millions in profits for the audience gathered in the soulless, burgundy-draped conference hall. The BlackBerrys were out as Einhorn, then 41, cleared his throat.

First came perfunctory disclaimers, and a round of thanks for his analysts' hard work. Einhorn, dressed in a dark suit, white shirt and patterned tie, added that the company he was about to talk about had declined to meet with him. The slide on the screen behind him read ominously: “Field of Schemes.” Attendees were almost giddy with anticipation. Why shouldn't they be? They had front row seats to a Wall Street beheading.

“The topic of today is the St. Joe Company,” Einhorn began, in his distinctive high-pitched ...