Greenlight Capital
Encyclopedia
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.
Greenlight invests primarily in publicly traded North American corporate debt offerings and equities. 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.
Unlike other funds, Greenlight does not use borrowed money, or leverage. The firm does not generate large trading volumes.
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. 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.
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.
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
.
In 3Q 2008, Greenlight lost 15% of its value, primarily from long positions on industrial companies like Helix Energy Solutions, as the SEC temporarily banning short selling of financial stocks. 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. Greenlight ended 2008 down 23% (its first annual loss). In October 2009 Greenlight reported it had recouped all of its losses from 2008.
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
which was founded by David Einhorn. Einhorn's commentary on the financial position of Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
in early 2008, and Greenlight's short selling
Short selling
In finance, short selling is the practice of selling assets, usually securities, that have been borrowed from a third party with the intention of buying identical assets back at a later date to return to that third party...
of Lehman stock, foreshadowed Lehmans' collapse.
Greenlight invests primarily in publicly traded North American corporate debt offerings and equities. It also manages a fund of funds and a private equity fund
Private equity fund
A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity....
through its affiliates, Greenlight Masters and Greenlight Private Equity Partners. It also operates Greenlight Capital Re, a property/casualty reinsurer.
Unlike other funds, Greenlight does not use borrowed money, or leverage. The firm does not generate large trading volumes.
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. It prospered in its early days by identifying weak financial firms for short selling, making significant gains from Conseco
Conseco
Conseco , originally Security Life of Indiana, is a financial services organization based in Carmel, Indiana. Conseco's insurance subsidiaries provide life insurance, annuity and supplemental health insurance products to more than 4 million customers in the United States...
, CompuCredit, Sirrom Capital, and Resource America.
A few months before the dot-com bust
Dot-com bubble
The dot-com bubble was a speculative bubble covering roughly 1995–2000 during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the more...
, 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.
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
Grand Central
-Transportation:* Grand Central Airport, a general aviation airport in Midrand, South Africa* Grand Central Airport , major location of early commercial air travel in California* Grand Central Parkway, in Queens, New York City...
, in New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
.
In 3Q 2008, Greenlight lost 15% of its value, primarily from long positions on industrial companies like Helix Energy Solutions, as the SEC temporarily banning short selling of financial stocks. 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. Greenlight ended 2008 down 23% (its first annual loss). In October 2009 Greenlight reported it had recouped all of its losses from 2008.