David Einhorn (hedge fund manager)

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David Einhorn
Born (1968-11-20) November 20, 1968 (age 48)
Residence Westchester, New York, U.S.
Nationality United States
Alma mater Cornell University
Occupation Investor, hedge fund manager, and philanthropist
Known for Founding and leading Greenlight Capital
Salary US$80 million (2011)
Net worth US$1.54 billion (February 2017)
Spouse(s) Cheryl Strauss (m. 1993; div. 2017)
Children Mitch Einhorn, & 2 others

David M. Einhorn (born November 20, 1968) is an American investor, hedge fund manager, and philanthropist. He is the founder and president of Greenlight Capital, a "long-short value-oriented hedge fund."[1]

Born in New Jersey, Einhorn graduated from Cornell University in 1991 and moved to Westchester, New York to start his fund. He started his fund in 1996 with $900,000 and has generated 16.5% annualized return for investors from 1996 to 2016.[2] As of 2017, Greenlight Capital has US$9.27 billion in assets under management. He has received extensive coverage in the financial press for his fund's performance, his investing strategy and his positions.[3]

Einhorn was ranked 44th in the Time 100 most influential list of people in the world in 2013.[4] According to Forbes Magazine, Einhorn has a net worth of US$1.54 billion (as of February 2017),[5] making him the 44th youngest billionaire on the Forbes 400 and the 18th highest-earning hedge fund manager in the world.[6][7]

Early life and education[edit]

Einhorn was born to a Jewish family in New Jersey, the son of Stephen and Nancy Einhorn,[8][9][10] The family moved to Wisconsin when he was seven.[10] in 1987, he graduated from Nicolet High School in Glendale, Wisconsin.[11] Einhorn graduated summa cum laude from Cornell University with a B.A. in Government from the College of Arts and Sciences in 1991. He was a member of the Sigma Alpha Epsilon fraternity at Cornell.[12] Einhorn lives in Westchester County, New York with his wife, Cheryl Strauss Einhorn, and three children.[12]

Investment career[edit]

Einhorn started Greenlight Capital in May 1996 with $900,000 in start up capital. In May 2002, he gave a speech at the Sohn Investment Research Conference where he recommended shorting a mid-cap financial company called Allied Capital eventually disclosing that he himself had a substantial short position. The day after the speech the company's stock went down by 20 percent.[13] Einhorn alleged the company of defruading the Small Business Administration while Allied said that Einhorn was engaging in market manipulation, and illegally accessed his phone records using pretexting.[14] In June 2007, after a lengthy investigation by the U.S. Securities and Exchange Commission (SEC), it found that Allied broke securities laws relating to the accounting and valuation of illiquid securities it held.[15] After the incident, Einhorn has published a book, Fooling Some of the People All of the Time regarding this six-year fight.[16] Reviews of the book were generally positive; Seekng Alpha, said of the book: "the case against Allied Capital is laid out to the last detail. Because of the immense amount of data in the book, I would imagine that some readers may want to skip a page here and there. However, the book is by no means dull. This book proves that truth is really stranger than fiction."[17][18] 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."[19]

Lehman Brothers[edit]

In July 2007, Einhorn shorted Lehman Brothers stock, believing that Lehman had massive exposures to illiquid real estate investments that were improperly accounted for.[20] He also claimed that they used dubious accounting practices in their financial filings.[3] Einhorn shared his thesis on Lehman in November 2007 at the Value Investing Congress.[21]

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.[3][22] In May, Lehman's CFO Erin Callan held a private teleconference with Einhorn and his staff, who[23] 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 would declare bankruptcy in September 2008.

Green Mountain Coffee Roasters[edit]

Speaking at the Value Investing Congress in New York City on October 17, 2011, Einhorn publicly announced his short position in Green Mountain Coffee Roasters stock.[24] Prior to that date, the company's share price had increased more than tenfold since March 2009, the third-biggest gain in the Standard & Poor's Midcap 400 Index. In his presentation Einhorn opined that the market for Green Mountain's new Keurig single-cup coffee brewer was "limited," and that the K-Cup coffee pods for the machine presented a "looming patent issue" for the company. He also said that Green Mountain had a "litany of accounting questions." Following Einhorn's speech Green Mountain's share price fell by 10 percent, closing that day at $82.50.[25]

A few weeks later on November 9, 2011, Green Mountain's quarterly report missed analyst expectations and its stock price plunged to $43.71. 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. The stock had a run up to 157 in Nov 2014, before its final pricing in the 90's, prior to the company being sold.

U.K. insider dealing[edit]

In January 2012, the U.K. Financial Services Authority (FSA) fined Einhorn and Greenlight Capital $11.2 million for trading on inside information. The FSA claimed Einhorn obtained information on the Punch Taverns Plc (PUB) equity fundraising by a broker representing the company prior to public knowledge of the event. Over the following four days, Einhorn sold more than 11 million shares, avoiding a 29.9% stock price collapse and subsequent loss of about £5.8 million.[26]

The Financial Services Authority stated:

The FSA accepted that Einhorn's trading was not deliberate because he did not believe that it was inside information. However, this was not a reasonable belief.[26] This was a serious case of market abuse by Einhorn and fell below the standards the FSA expects, particularly due to Einhorn's prominent position as President of Greenlight and given his experience in the market.[26] Einhorn is an experienced professional with a high profile in the industry. 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. It is highly damaging to market confidence when privileged shareholders commit market abuse, and the high penalty reflects the seriousness of his breach.[26]

Einhorn called the £7.2m fine "unjust" and "inconsistent with the law" but said he would pay it "rather than continue an arduous fight" [27] The fine was the second largest levied on an individual in the history of Britain's Financial Services Authority.[28]

Fracking Industry[edit]

Speaking at the Sohn Investment Conference on May 4, 2015, Einhorn sharply criticized the practice of hydraulic fracturing or "fracking." He said, "A business that burns cash and doesn't grow isn't worth anything."[29] Specifically, Einhorn announced short positions on Pioneer Natural Resources and Concho Resources. David Einhorn also shows his humorous side joking that Pioneer natural resources is a "Motherfracker". [30]

On May 26, 2011, Einhorn called for Steve Ballmer, CEO of Microsoft, to step down after Microsoft had been passed by both Google and Apple[31] in market value.[32]

Apple Inc.[edit]

In early February 2013 Einhorn filed a lawsuit against Apple Inc. in a Manhattan court in order to pressure the company to issue dividend-paying perpetual preferred stock as a means of distributing some of its $137 billion in cash to shareholders.[33] Later that month Einhorn set what one Wall Street Journal headline called a "Legal Precedent in Corporate Governance" when the court ruled in favor of Einhorn and determined that Apple's attempt to bundle a measure requiring a shareholder vote prior to issuing preferred shares with a larger shareholder proposal "impermissibly bundles 'separate matters' for shareholder consideration."[34][35]

Since inception (May 1996 – Dec. 2015), David Einhorn's hedge fund, Greenlight Capital has annualized returns of 16.5%.[2]

Personal life[edit]

Einhorn's father Stephen and his brother Daniel together run Einhorn & Associates, consulting firm, and Capital Midwest Fund, a venture capital fund.[36] David Einhorn was married to Cheryl Strauss, a financial reporter and media consultant from 1993 to 2017.[37][38]

David Einhorn is a known Democratic donor.[39] He is reported to drive a Honda Odyssey.[40][41]

He is also a founding Master Player of the Portfolios with Purpose virtual stock trading contest.[42]

Wealth and philanthropy[edit]

As of February 2017, Forbes Magazine reported Einhorn to have an overall net worth of US$1.54 billion.[43] He is the 432nd richest person in the United States, and the 18th wealthiest hedge fund manager.[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 winnings (over $650,000) to the foundation.[44] He is also on the board of the Robin Hood Foundation 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 all of the general partner's profits from the 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). In 2012, Einhorn donated his winnings from the 2012 World Series of Poker Big One for One Drop Tournament (which had a one million dollar buy in, and in which he won $4,352,000 for his 3rd-place finish) to City Year.[45][46]

New York Mets[edit]

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.[47] Einhorn had the option to purchase a majority stake in the Mets after three years if current majority owner Fred Wilpon and his family could not meet their financial obligations by then.[48] On September 1, 2011, the Mets announced that they had ended negotiations to sell minority ownership to Einhorn.[49]

Bibliography[edit]

References[edit]

  1. ^ Alden, William (25 October 2012). "David Einhorn Continues His Take Down of Fed Policy". DealBook. Retrieved 14 March 2013. 
  2. ^ a b "Returns since Inception" (PDF). Retrieved 13 May 2016. 
  3. ^ a b c Hugo Lindgren, "The Confidence Man", New York Magazine, 2008/06/15.
  4. ^ "44th in Time's most influential list" (PDF). Retrieved 13 May 2016. 
  5. ^ a b "David Einhorn". Forbes. Retrieved 2017-02-14. 
  6. ^ "David Einhorn". Forbes. Retrieved 2017-02-19. 
  7. ^ Blake, Brock. "No. 14: David Einhorn - pg.14". Forbes. Retrieved 2017-02-19. 
  8. ^ Milwaukee Journal Semtinel: "Venture capitalist Einhorn paid for voter fraud billboards" By Daniel Bice October 29, 2012
  9. ^ Forbes Israel: Jewish Billionaires - Profile of David Einhorn April 14, 2013 (in Hebrew)
  10. ^ a b New York post: "Mets agree to sell minority stake in team" By CLEMENTE LISI May 26, 2011
  11. ^ Sandomir, Richard; Belson, Ken (6 Jun 2011). "Before Mets, Einhorn Longed for Brewers". The New York Times. Retrieved 18 Sep 2012. 
  12. ^ a b Julia La Roche (February 8, 2013). "The Fabulous Life Of David Einhorn—The Billionaire Hedge Funder Going To Battle Against Apple". Business Insider. 
  13. ^ Brown, Abram (21 February 2013). "Apple: Einhorn Refuses To Stop, Estimates Preferred Stock Plan Could Add $150 A Share". Forbes. Retrieved 23 February 2013. 
  14. ^ "The Hedge Fund Witch Hunt: Eliot Spitzer's latest investigation is pursuing the wrong guys", Slate Magazine, February 13, 2003.
  15. ^ Following Clues the S.E.C. Didn't
  16. ^ FoolingSomePeople.com
  17. ^ UltraLong (2011-03-05). "Book Review: 'Fooling Some of the People All of the Time: A Long Short (And Now Complete) Story'". Seeking Alpha. Retrieved 2017-02-24. 
  18. ^ Goldfarb, Zachary A. (March 23, 2010). "SEC inspector general raises red flags in new report". Washington Post. 
  19. ^ Opalesque (13 March 2009). "Einhorn: Allied's rise and fall shows poor oversight". 
  20. ^ Lina Saigol, "Denial disguises Lehman reality", Financial Times / FT.com, 2008/09/15.
  21. ^ Einhorn (29 November 2007). "A Few thoughts About Risk" (PDF). 
  22. ^ Cyrus Sanati, Erin Callan: the Greta Garbo of Wall Street, New York Times, 2010/03/09.
  23. ^ "How to play the short game". Financial Times. 2008-07-16. Retrieved 2008-09-18. 
  24. ^ Wolinsky, Jacob (2011-10-17). "David Einhorn is Short GMCR". ValueWalk.com. ValueWalk LLC. Retrieved 2012-07-07. 
  25. ^ Patton, Leslie; Gammeltoft, Nikolaj (October 17, 2011). "Bloomberg News: Green Mountain Drops as David Einhorn Says Market 'Limited'". Businessweek.com. New York. Bloomberg News. Archived from the original on 2012-07-07. Retrieved July 7, 2012. 
  26. ^ a b c d "FSA fines hedge fund manager David Einhorn £7.2m for insider trading", fsa.gov.uk.
  27. ^ "FSA fines hedge fund manager David Einhorn £7.2m for insider trading", telegraph.co.uk.
  28. ^ Schreiber, Sholom, "David Einhorn Given Second Largest Fine in British Financial History", jewishvoiceny.com, 01 February 2012.
  29. ^ Chung, Juliet; Benoit, David (May 4, 2015). "Wall Street Journal: Einhorn Hits Fracking Stocks". WSJ.com. New York. 
  30. ^ "Greenlight Fracking". Retrieved 16 May 2016. 
  31. ^ Helft, Miguel; Vance, Ashlee (May 26, 2010). "Apple Passes Microsoft as No. 1 in Tech". The New York Times. Retrieved May 26, 2011. 
  32. ^ Rigby, Bill; Herbst, Svea; Chan, Edwin (May 25, 2011). "Hedge fund star calls for Microsoft's Ballmer to go". Thomson Reuters. Retrieved May 26, 2011. 
  33. ^ "David Einhorn cash case against Apple Inc rests on unusual legal tactic". The Indian Express. Reuters. 10 February 2013. Retrieved 23 February 2013. 
  34. ^ Benoit, David (22 February 2013). "Einhorn's Apple Victory Seen as Legal Precedent in Corporate Governance". Wall Street Journal. Retrieved 23 February 2013. 
  35. ^ Strumpf, Dan; Bray, Chad; Lessin, Jessica E. (22 February 2013). "Judge Grants David Einhorn's Bid to Block Apple Proxy Vote". The Wall Street Journal. Retrieved 23 February 2013. 
  36. ^ Bice, Daniel,"Venture capitalist Einhorn paid for voter fraud billboards", Milwaukee Journal Sentinel, October 29, 2012. Retrieved 2012-10-30.
  37. ^ Smith, Emily (2017-02-23). "Hedge fund billionaire David Einhorn heading for divorce". Page Six. Retrieved 2017-02-24. 
  38. ^ Morgenson, Gretchen (2017-02-19). "The Rise and Decline of the Hedge Fund Billionaire". The New York Times. ISSN 0362-4331. Retrieved 2017-02-24. 
  39. ^ "David Einhorn Political Contribution List". 
  40. ^ "Einhorn Moves Markets — Except When It Comes to Apple". 
  41. ^ "When David Einhorn Talks, Markets Listen—Usually". Bloomberg.com. 2013-03-22. Retrieved 2017-02-23. 
  42. ^ Ziegler, Maseena (1 December 2012). "When Quitting Is Not An Option - How You Can Find Purpose And Fulfillment Through Your Career". Forbes. Retrieved 27 December 2012. 
  43. ^ "David Einhorn". Forbes. Retrieved 2017-02-14. 
  44. ^ Bob Pajich, "David Einhorn Donates All $$659,730 WSOP Winnings", CardPlayer (website), 2006/08/08.
  45. ^ "Statement from Michael Brown, City Year CEO & Co-Founder, On David Einhorn's Participation in One Drop Poker Tournament". Sacramento Bee. 3 July 2012. Retrieved 3 July 2012. 
  46. ^ "Event #55: The Big One for One Drop - No-Limit Hold'em". WSOP. 3 July 2012. Retrieved 3 July 2012. 
  47. ^ "New York Mets select David Einhorn as preferred partner" (Press release). New York Mets. May 26, 2011. Retrieved May 26, 2011. 
  48. ^ Rubin, Adam (May 29, 2010). "Source outlines Mets-David Einhorn deal". ESPN.com. Retrieved May 29, 2011. 
  49. ^ Sandomir, Richard (September 1, 2011). "Mets' Deal With Einhorn Is Off". The New York Times. Retrieved September 1, 2011. 
  50. ^ UltraLong (2011-03-05). "Book Review: 'Fooling Some of the People All of the Time: A Long Short (And Now Complete) Story'". Seeking Alpha. Retrieved 2017-02-24. 

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