David Einhorn (hedge fund manager)

David Einhorn
Born	November 20, 1968 (1968-11-20)
Residence	Westchester County, New York, United States
Alma mater	Cornell University
Occupation	Founder & President, Greenlight Capital Hedge fund manager

David Einhorn (born November 20, 1968), an American hedge fund manager, is the Founder and President of Greenlight Capital, a "long-short value-oriented hedge fund". He started Greenlight Capital in 1996 with $900,000. Greenlight has generated about a 22% annualized return for investors. Einhorn is also the Chairman of Greenlight Capital RE, Ltd, a Cayman Islands-based reinsurance company and is a major shareholder.

Einhorn has received extensive coverage in the financial press for short selling Allied Capital, Lehman Brothers and Green Mountain Coffee Roasters stock.^{[citation needed]} He is also a critic of current investment-banking practices, saying they are biased to maximize employee compensation. He cites a statistic that investment banks pay out 50 percent of revenues as compensation, and higher leverage means more revenues, making this model inherently risky.

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. 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.

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 defrauded the Small Business Administration. Allied said that Einhorn was engaged in market manipulation, and illegally accessed his phone records using pretexting.

The U.S. Securities and Exchange Commission (SEC) investigated Einhorn for market manipulation, and Eliot Spitzer also announced that he intended to start an investigation. In June 2007, the SEC found that Allied broke securities laws relating to the accounting and valuation of illiquid securities it held. Einhorn has published a book, Fooling Some of the People All of the Time regarding this six year fight. . In late 2008, the SEC began investigating 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."

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...Our country, our economy, is paying a huge price for that."

Lehman Brothers

In July 2007, Einhorn shorted Lehman Brothers stock, believing that Lehman was under-capitalized, and had massive exposures to CDOs that were improperly accounted for. He also claimed that they used dubious accounting practices in their financial filings.

When Bear Stearns had to be bailed out by the Federal Reserve in March 2008, Lehman was widely considered to be in a weak financial situation.^{[citation needed]} In a speech at a conference in April, Einhorn announced his Lehman short position. In May, Lehman's CFO Erin Callan held a private teleconference with Einhorn and his staff, who hoped Callan could explain discrepancies they had uncovered since the firm's latest financial filing. Einhorn publicly characterized Callan's responses on the call in a negative light and Lehman stock fell sharply. Callan was fired a few weeks later when Lehman reported a $2.8 billion quarterly loss. Lehman soon declared bankruptcy 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. 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. On September 1, 2011, the Mets announced that they had ended negotiations to sell minority ownership to Einhorn.

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 in market value.

Green Mountain Coffee Roasters

Einhorn publicly announced his short positions in Green Mountain Coffee Roasters stock during the summer of 2011 at around a $80 share price. On November 9, 2011, Green Mountain's quarterly report missed analyst expectations and its stock price plunged to $44. The company's CEO Lawrence J. Blanford cited a "number of factors including changes in wholesale customer ordering patterns in our grocery and club channels" for the underperformance of the company.

Insider trading

In January 2012, Einhorn and Greenlight Capital were fined $11.2 million (split equally) by the U.K. Financial Services Authority (FSA) for trading on inside information in Punch Taverns Plc (PUB) in 2009. According to the FSA, Einhorn was told of Punch Taverns’ equity fundraising by a broker representing the company prior to the event. Einhorn sold more than 11 million shares over the following four days, avoiding losses of about 5.8 million pounds. The FSA found that the violation was inadvertent and that Einhorn did not believe that he had been given any inside information. The FSA said of Einhorn: “We expect someone in his position to be able to identify inside information when he receives it and to act appropriately. His failure to do so is a serious breach of the expected standards of market conduct.” In response, Einhorn denied any wrongdoing and criticized the FSA's case as “akin to a traffic cop with a quota at the end of the month and a miscalibrated radar gun.”

Personal life

Einhorn graduated summa cum laude from Cornell University with 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. Einhorn lives in Westchester County, New York with his wife and three children.

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 winnings (over $650,000) to the foundation. 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 shorting of Allied Capital stock (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)).

External links

• "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