Greenlight Capital is a hedge fund which was founded by David Einhorn. Einhorn's commentary on the financial position of Lehman Brothers in early 2008, and Greenlight's short selling of Lehman stock, foreshadowed Lehmans' collapse.[1]
Greenlight invests primarily in publicly traded North American corporate debt offerings and equities.[2] It also manages a fund of funds and a private equity fund through its affiliates, Greenlight Masters and Greenlight Private Equity Partners. It also operates Greenlight Capital Re, a property/casualty reinsurer.[2]
Unlike other funds, Greenlight does not use borrowed money, or leverage. The firm does not generate large trading volumes.[1]
Founded in 1996 with $900,000 of capital (half borrowed from Einhorn's parents), Greenlight has generated greater than a twenty-five percent annualized net return for its partners and investors over its life.[1] It prospered in its early days by identifying weak financial firms for short selling, making significant gains from Conseco, CompuCredit, Sirrom Capital, and Resource America.[1]
A few months before the dot-com bust, Greenlight was burnt by a short on Chemdex that was bought back at $160, losing the firm 4% of its total capital. In a few months, Chemdex stock was worth around $2.[1]
As of June 2008, there were 25 employees, including 9 analysts and 1 trader. It occupies a single high floor of an office building near Grand Central, in New York.[1]
In 3Q 2008, Greenlight lost 15% of its value,[3] primarily from long positions on industrial companies like Helix Energy Solutions,[3][4] as the SEC temporarily banning short selling of financial stocks.[5][6] With the majority of Greenlight Capital's money in bonds and long positions on stocks, this stopped hedge funds minimizing 'long' losses or offsetting them with short gains.[7] Greenlight ended 2008 down 23% (its first annual loss).[8] In October 2009 Greenlight reported it had recouped all of its losses from 2008.[9]
|
||||||||||||||||||||||||||||||||||||