Einhorn says Moody’s has negative net worth $900 mln $7.2 mln Allied Capital short-sale gain goes to charity Einhorn contends that investors
have learned not to rely on Moody’s, which for years has been criticized because it earns fees from the companies it rates. And after the mortgage melted down in 2007, Moody’s came under fire for giving top grades to bonds and derivatives backed by subprime loans. Yet Einhorn noted equity investors still believe in the agencies. Moody’s shares at 19 times estimated earnings, he said, though he said the company has a negative net worth of $900 million. Moody’s had long been a favorite among investors because the limited number of firms approved by the to rate debt lets these firms generate fat profit margins. McGraw-Hill Cos Inc’s Standard & Poor’s and Fitch Ratings are Moody’s rivals. Regulators and lawmakers for years talked about reforming the ratings system, questioning the issuer-funded model that critics say conflicted with the interests of investors who buy company debt, municipal bonds or asset-backed securities. Einhorn called for sterner measures.
“Why reform them if we can get rid of them” he said. “Are we waiting for then to blow up the Lunar as well”