Photo: AP Images
David Einhorn, the founder of Greenlight Capital, is one of the most closely followed hedge fund managers.When he talks about a company, the stock is likely to move and even he knows it.
“Apparently now I’m a verb,” Einhorn jokingly told the audience at the Value Investing Congress last fall showing an article with the word “Einhorned” in the headline.
Yesterday, Einhorn made headlines after taking aim at Apple’s massive cash reserves it has on its balance sheet. Greenlight also said it’s going to sue Apple in New York federal court to prevent a new proposal to prevent the issuance of preferred stock.
Now let’s take the time to get to know this hedge fund hot-shot better.
His father and grandfather ran a paint company in New Jersey. His dad got interested in M&A after he sold the business.
When the energy crisis hit in the 1970s, his father decided to sell Adelphi Paints.
That's when his dad first became interested in M&A. Since he wasn't able to get a job on the Street, he started an M&A shop in their home in Demarest, New Jersey.
When Einhorn was 7 years old, his family moved from New Jersey to a suburb of Milwaukee, Wisconsin. Einhorn's mum Nancy is originally from Milwaukee.
He grew up rooting for the Milwaukee Brewers professional baseball team.
He graduated from one of the best school's in the state, Nicolet High School, in 1987.
While in high school, he competed on the debate team. He still uses those debate skills today in his hedge fund career.
He graduated summa cum laude from Cornell University with his bachelor's in government. He was also elected to Phi Beta Kappa in college.
During his junior year, he interned at the SEC's Office of Economic Analysis and wrote his thesis on cyclical regulation in the U.S. airline industry.
He was also a brother in Sigma Alpha Epsilon fraternity.
Before graduation, Einhorn considered a career in the CIA.
He ended up accepting an analyst position with boutique investment bank Donaldson, Lufkin & Jenrette, which was acquired by Credit Suisse in 2000.
In 1993, Einhorn married Cheryl Beth Stauss, who also graduated magna cum laude from Cornell University.
She's an award-winning financial reporter who is currently working as a media consultant, according to a bio on Columbia Business School's website. She's also an adjunct professor at Columbia University's Graduate School of Journalism and an adjunct at the Columbia Business School.
The Einhorns have three children and live in Westchester County, New York.
Einhorn launched Greenlight Capital with Jeff Keswin, his co-worker from Siegler, Collery & Co, in 1996.
They started the fund with only $900,000 in assets under management.
His wife Cheryl came up with the name 'Greenlight.'
In 2011, Einhorn announced a short position on Green Mountain Coffee Roasters, which caused a big sell-off in the stock.
Green Mountain was already a popular stock to short, but Einhorn backed up his position with a massive 100+ slide presentation on why the company was headed for doom, pointing to its questionable accounting methods and possible limited demand for its K-cup products.
His short call influence stretches back over a decade. He became prominent for his short call on Allied Capital back in 2002.
During the Ira Sohn conference in 2002, Einhorn presented gave a short thesis on Allied Capital, a mid-market private equity firm.
He reasoned that the firm was valuing its debt in a questionable manner, which inflated the stock.
His idea initially backfired. He was accused of market manipulation after Allied's stock plunged following his speech and was investigated by the SEC.
But he was vindicated in 2007, when the SEC investigated Allied and found it guilty of securities fraud. Allied was eventually bought out and taken private by another company.
Source: Fooling Some People All The Time
In May 2008, Einhorn publicized his most famous short--Lehman Brothers.
At a conference, Einhorn explained that Lehman was taking too much risk and there were discrepancies in their numbers in SEC filings. He had also recently met with newly-appointed Lehman CFO Erin Callahan and was unimpressed when she was unable to answer some of his questions about the investment bank.
Lehman filed for bankruptcy in September 2008.
He's had his bumps in the road, too. His hedge fund was fined for insider trading last year by the FSA.
Greenlight Capital was fined $11.2 million in January 2012 by Britain's Financial Services Authority for trading on inside information over the company Punch Taverns.
The FSA pointed to the fact that Greenlight sold stock in Punch Taverns three days before the pub operator announced it was planning on raising more funds from investors.
Although Einhorn paid the fine because he didn't want to deal with the hassle of fighting the charge, he publicly stated that his fund's actions 'resembles insider dealing as much as soccer resembles football.'
Source: Business Insider
In 2006, Einhorn participated in the World Series of Poker came in 18th place.
He donated his $650,000 winnings to the Michael J. Fox Foundation for Parkinson's research, where he is a board member. His grandfather had Parkinson's.
Last year, he placed third in the World Series of Poker Big One for One Drop Tournament, which had a million dollar buy-in. He donated the $4,325,000 winnings to City Year.
He is also on the board of the Robin Hood Foundation.
Source: Business Insider
In 2011, Einhorn was in talks to buy a minority ownership stake in the New York Mets--of whom he had been a life-long fan--for $200 million.
The deal, however, fell apart in the end because the Mets owners were worried about Einhorn's intentions to eventually obtain a majority ownership in the team.
Einhorn revealed that it was a talk by his grandfather that inspired his confidence in gold. Now, most of Greenlight's assets are denominated in gold.
Apparently, Einhorn's fund also has a vault of gold stashed somewhere in New York City--he's said it is used as a hedge against inflation. We can only wonder where it is.
Einhorn's Greenlight Capital, which owns more than a million Apple shares, said yesterday that it's suing Apple over a proposal from the company that would make it more difficult to issue preferred stock that paid a dividend.
He wants Apple to issue preferred stock as a way of unlocking value for shareholders.
In a letter and press release to shareholders, Einhorn urged them to vote against the proposal.