- David Einhorn (hedge fund manager)
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David Einhorn Born November 20, 1968 Residence Westchester County, New York, United States Alma mater Cornell University[1] Occupation Founder & President, Greenlight Capital
Hedge fund managerDavid Einhorn (born November 20, 1968) is an American hedge fund manager, he is the Founder and President of Greenlight Capital, a "long-short value-oriented hedge fund", which he began with in 1996 with around $900,000. Greenlight has historically generated greater than a twenty-two percent annualized net return for partners and investors.[2][3] Einhorn is the Chairman of Greenlight Capital RE, Ltd, a Cayman Islands-based reinsurance company and one of its major shareholders.
Born in 1968, he lives in Westchester County, New York with his wife, 2 daughters and son.
His name is most closely associated with short selling, namely borrowing a stock for a period of time and selling it, with the intention of later buying back the shares at a lower price.[citation needed]
His two most famous short positions are Allied Capital and Lehman Brothers.[citation needed]
He is a critic of current investment-banking practices, saying they are incentivized to maximize employee compensation. He cites the statistic that investment banks pay out 50 percent of revenues as compensation, and higher leverage means more revenues, making this model inherently risky.[2]
Einhorn was a director at New Century Financial Corp., a major subprime mortgage lender, between March 2006 and March 2007. Greenlight Capital held 6.3% of the company's stock at the time he resigned from the board.[4] In 2010, Einhorn was among 13 former officers and directors of New Century that paid more than $90 million to settle various lawsuits against the company, which filed bankruptcy in April 2007.[5]
Einhorn is a major contributor and board member of The Michael J. Fox Foundation. In 2006, Einhorn finished 18th in the World Series of Poker main event and donated his entire winnings of $659,730 to the foundation.[6] He is also on the board of Robin Hood and a contributor to numerous charities in the New York area. In the Spring of 2009, as promised in his book Fooling Some of the People All of the Time, Greenlight Capital donated half its share of profits from their short thesis on Allied Capital (an additional $6 million - Greenlight already donated $1 million in 2005 to Tomorrows Children's Fund - to make a total of $7 million) to three organizations (Tomorrows Children's Fund, The Project On Government Oversight (POGO) and the Center for Public Integrity (CPI)).
Contents
Education
Einhorn graduated summa cum laude with distinction in all subjects from Cornell University, where he earned a BA in Government from the College of Arts and Sciences in 1991. He was a member of the Sigma Alpha Epsilon fraternity at Cornell.
Allied Capital
In May 2002, at the Ira W. Sohn Investment Research Conference, Einhorn made a speech about a mid-cap financial company called Allied Capital, and recommended shorting it. The stock opened down 20 percent the next day.
Einhorn claimed that Allied was involved in lending practices that actively defrauded the Small Business Administration in the US, and therefore, indirectly, the US taxpayer. Allied said that Einhorn was engaged in market manipulation. To prove this, Allied fraudulently accessed his phone records using pretexting.
The U.S. Securities and Exchange Commission (SEC) investigated Einhorn, as well as managers Whitney Tilson, Bill Ackman and Guy Spier for market manipulation. Eliot Spitzer also announced that he intended to start another investigation[7]. In June 2007, the S.E.C. found that Allied broke securities laws relating to the accounting and valuation of illiquid securities it held.[8]
Einhorn has published a book, Fooling Some of the People All of the Time[9] regarding his battle. FoolingSomePeople.com, the website to promote the book, has information on his angle of the dispute, including a press release from Allied in February 2007 admitting that an agent of the company obtained Einhorn's phone records fraudulently.
His battle against Allied Capital lasted six years in all. Einhorn would come to view Allied as a microcosm of market trends. "What we've seen a year later is that Allied was the tip of an iceberg; that this kind of questionable ethic, philosophy and business practice was far more widespread than I recognized at the time," he said. "Our country, our economy, is paying a huge price for that."[10]
In late 2008, the Office of the Inspector General of the Securities Exchange Commission announced that it was investigating some of the charges that Einhorn has made about the SEC's mishandling of this matter, including the possibility that "a former SEC attorney may have taken confidential investigative materials with him when he left the Commission and provided those materials to a company he went to work for as a lobbyist."
Lehman Brothers
Starting July 2007, Einhorn became a short seller in Lehman Brothers stock. He believed that Lehman was under-capitalised, and had massive exposures to CDOs that were not written down properly.[11] He also claimed that they used dubious accounting practices in their financial filings.[2]
When Bear Stearns had to be bailed out by the Federal Reserve in March 2008, Lehman was widely considered to be in a fragile state.[citation needed] Lehman's CFO was Erin Callan, hailed by the Wall Street Journal as "Lehman's Straight Shooter". But she had been on the job for just six months and her background was as a tax lawyer, not in finance.[2]
In a speech at a conference in April, Einhorn started talking publicly about his Lehman short positions. Lehman called Greenlight and asked for a copy of the speech, which was sent over.[2][12]
In May 2008, Lehman CFO Callan had a private call with Einhorn and his analysts.[13] The conversation with Callan was to give her a chance to explain discrepancies he had uncovered between the firm's latest financial filing and what had been discussed during its conference call about that filing.
Callan is said to have fumbled some of her responses to questions on Lehman's asset valuations. When Einhorn later went public with the conversation, the declining Lehman share price took a further knock. Callan was fired a few weeks later, when Lehman reported a worse than expected $2.8 billion second-quarter loss.
Lehman went bankrupt in September 2008.
New York Mets
On May 26, 2011, the New York Mets announced that Einhorn had agreed to buy a minority share of the baseball team for $200 million.[14] According to sources close to the deal, Einhorn had the option to purchase a majority stake in the Mets after three years for $1 if current majority owner Fred Wilpon could not meet his financial obligations by then.[15] On September 1, 2011, the Mets announced that they had ended negotiations to sell minority ownership to Einhorn.[16]
Microsoft
On May 26, 2011, Einhorn called for Steve Ballmer, CEO of Microsoft, to step down after Microsoft had been passed by both IBM and Apple[17] in market value.[18]
Green Mountain Coffee Roasters
Einhorn had publicly announced his positions in shorting GMCR months ahead of Fall 2011 at around the $80 dollar range. On November 9, 2011, the Q3 reports had missed analyst expectations by a small margin and its stock price plunged over 35% to $44.10 in the aftermarkets. The company's chief executive Lawrence J. Blanford cited, "a result of number of factors including changes in wholesale customer ordering patterns in our grocery and club channels."
References
- ^ "Alma Mater". Greenlightre.com. 2009. http://greenlightre.com/?q=node/9.
- ^ a b c d e Hugo Lindgren, "The Confidence Man", New York Magazine, 2008/06/15.
- ^ David Einhorn, "About David", Fooling Some of the People All of the Time: A Long Short Story" (website/blog), last visited 2010/03/09.
- ^ http://www.bloomberg.com/apps/news?pid=newsarchive&sid=asiYkh.yMqYw&refer=home
- ^ http://articles.latimes.com/2010/jul/31/business/la-fi-new-century-20100731
- ^ Bob Pajich, "David Einhorn Donates All $666,666 WSOP Winnings", CardPlayer (website), 2006/08/08.
- ^ The Hedge Fund Witch Hunt: Eliot Spitzer's latest investigation is pursuing the wrong guys. Slate Magazine Feb 13, 2003http://www.slate.com/articles/business/moneybox/2003/02/the_hedgefund_witch_hunt.html
- ^ Following Clues the S.E.C. Didn't
- ^ http://www.amazon.com/dp/0470073942/
- ^ Opalesque (13 March 2009). "Einhorn: Allied's rise and fall shows poor oversight". http://www.opalesque.com/50800/david%20einhorn/Comment_Study_says_could_be208.html.
- ^ Lina Saigol, "Denial disguises Lehman reality", Financial Times / FT.com, 2008/09/15.
- ^ Cyrus Sanati, Erin Callan: the Greta Garbo of Wall Street, New York Times, 2010/03/09.
- ^ "How to play the short game". Financial Times. 2008-07-16. http://www.ft.com/cms/s/0/499c2242-5356-11dd-8dd2-000077b07658.html. Retrieved 2008-09-18.
- ^ "New York Mets select David Einhorn as preferred partner" (Press release). New York Mets. May 26, 2011. http://newyork.mets.mlb.com/news/press_releases/press_release.jsp?ymd=20110526&content_id=19597134&vkey=pr_nym&fext=.jsp&c_id=nym. Retrieved May 26, 2011.
- ^ Rubin, Adam (May 29, 2010). "Source outlines Mets-David Einhorn deal". ESPN.com. http://sports.espn.go.com/new-york/mlb/news/story?id=6601862. Retrieved May 29, 2011.
- ^ Sandomir, Richard (September, 1 2011). "Mets’ Deal With Einhorn Is Off". The New York Times. http://www.nytimes.com/2011/09/02/sports/baseball/mets-deal-with-einhorn-is-off.html?ref=sports. Retrieved September, 1 2011.
- ^ Helft, Miguel; Vance, Ashlee (May 26, 2010). "Apple Passes Microsoft as No. 1 in Tech". The New York Times. http://www.nytimes.com/2010/05/27/technology/27apple.html. Retrieved May 26, 2011.
- ^ Rigby, Bill; Herbst, Svea; Chan, Edwin (May 25th, 2011). "Hedge fund star calls for Microsoft's Ballmer to go". Thomson Reuters. http://www.reuters.com/article/2011/05/25/us-microsoft-idUSTRE74O8BQ20110525. Retrieved May 26, 2011.
External links
- The David Einhorn Page
- "David the Goliath". Worth Magazine. September, 2008. Archived from the original on 2008-09-28. http://web.archive.org/web/20080928124235/http://www.worth.com/Editorial/Einhorn-Interview.aspx. Retrieved September 2008.
- "The End of the Financial World as We Know It," New York Times
- "Einhorn bets on major currency 'death spiral'" Marketwatch.com
Categories:- 1968 births
- Living people
- American poker players
- Cornell University alumni
- American money managers
- Hedge fund managers
- American philanthropists
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