David M. Einhorn: Investor, Hedge Fund Guru, and Poker Enthusiast
David M. Einhorn, born on November 20, 1968, is an American
investor, hedge fund manager, and enjoys playing poker as a hobby. He founded
Greenlight Capital, a hedge fund focused on value-oriented investing. Einhorn
grew up in New Jersey and graduated from Cornell University before starting
Greenlight Capital in 1996. The fund performed exceptionally well in its early
years, with annual returns far surpassing the market average. However, in
recent years, Greenlight Capital's assets under management have declined from
around $12 billion in 2014 to approximately $5.5 billion by July 2018, as the
fund experienced losses in 2017 and 2018. Einhorn's investment strategies and
fund performance have garnered significant attention from the financial media.
In 2013, he was recognized as one of Time magazine's "100 most influential
people in the world." As of June 2019, Einhorn's net worth was estimated
to be around $1.5 billion according to Investopedia.
The Early Years of David M. Einhorn: From New Jersey to
Wisconsin and Academic Success at Cornell
David M. Einhorn was born into a Jewish family in New Jersey
to parents Stephen and Nancy Einhorn. He grew up in Demarest, New Jersey, but
later moved to Wisconsin with his family when he was seven years old. His
father, Stephen Einhorn, is the founder and president of Einhorn &
Associates, a consulting firm, and Capital Midwest Fund, a venture capital
fund. David has a brother named Daniel who also works with their father. He
completed his high school education at Nicolet High School in Glendale,
Wisconsin, graduating in 1987. Einhorn excelled academically and graduated summa
cum laude from Cornell University in 1991 with a B.A. in government from the
College of Arts and Sciences. During his time at Cornell, he was a member of
the Sigma Alpha Epsilon fraternity.
A Maverick Investor's Battles with Wall Street Giants
David M. Einhorn launched Greenlight Capital in May 1996
with a modest start-up capital of $900,000. His reputation as a shrewd investor
began to solidify when, in May 2002, he delivered a speech at the Sohn
Investment Research Conference where he recommended shorting a mid-cap
financial company called Allied Capital. Einhorn revealed that he held a
substantial short position in the company, causing its stock to plummet by 20%
the following day. This sparked a contentious battle between Einhorn and Allied
Capital, with accusations of fraud and market manipulation flying from both
sides. After a six-year investigation by the U.S. Securities and Exchange
Commission (SEC), it was found that Allied had violated securities laws
relating to the accounting and valuation of illiquid securities it held.
Einhorn chronicled his experiences in his book "Fooling
Some of the People All of the Time," shedding light on the questionable
practices he encountered. He viewed the Allied Capital incident as indicative
of wider ethical issues in the market.
In July 2007, Einhorn made headlines again when he shorted
Lehman Brothers stock, citing concerns about the firm's exposure to risky real
estate investments and dubious accounting practices. He shared his thesis on
Lehman at the Value Investing Congress in November 2007. As events unfolded,
Lehman's financial vulnerabilities became apparent, leading to its eventual
bankruptcy in September 2008. Einhorn's prescient warnings had once again
proved astute, cementing his reputation as a maverick investor willing to take
on Wall Street giants.
David M. Einhorn: Market Moves and Regulatory Scrutiny
In October 2011, David Einhorn made a public statement
saying he was betting against Green Mountain Coffee Roasters (GMCR) stock. He
gave reasons why he thought the company's stock would drop, like saying that
the market for their new coffee maker was already full, there might be a
problem with their coffee pod patents, and their accounting might have
surprises. After he made this announcement, the company's stock price dropped
by 10%. Then, in November, it dropped even more, by 50%, because the company
didn't meet what experts thought they would make in their quarterly report.
In 2012, Einhorn was fined £7.2 million by the UK's
securities watchdog FSA because they said he was involved in market
manipulation. This happened when he got a phone call from a broker who was
working for a company called Punch Taverns PLC. The broker told Einhorn that
the company was going to raise a lot of money by selling more of its shares.
Einhorn quickly sold all his shares in the company after this call. The FSA said
this was unfair and illegal because he acted on information that wasn't public
yet, which is called insider trading.
David Einhorn's Struggles: A Shift in Market Dynamics Tests
Investment Conviction
Recently, David Einhorn's performance at Greenlight Capital
hasn't been as strong as before, with some of the worst results compared to his
peers. Since 2014, the fund has lost 25% of its value, with an additional 15%
lost in 2018 up to now. According to Bloomberg, nearly all of the top 40
positions in his $5.5 billion portfolio have suffered losses this year. Despite
this, Einhorn insists that his investment strategies are still sound and
believes that his portfolio will perform well in the long run.
Critics accuse Einhorn of sticking too closely to his old
methods, such as buying undervalued companies he expects to rebound and selling
those he sees as overpriced, even as the industry evolves. Currently, he's
betting on the cheap stock of General Motors Co. (GM) but is short-selling a
group of stocks including Netflix Inc. (NFLX) and Amazon.com Inc. (AMZN), which
he considers to be in bubble territory despite their recent strong performance.
Some in the market are skeptical of Einhorn's approach, which has worked in the
past but may not be as effective now. There are concerns that he's shifted his
focus from smaller, potentially lucrative stocks to larger, more established
companies with limited growth potential.
Despite the criticism, some investors admire Einhorn's
commitment to his investment strategy in the face of changing market
conditions. However, recent reports indicate that many former investors are
considering pulling out of Einhorn's fund if its performance doesn't improve.
David M. Einhorn: Family, Politics, and Quirks of a
Billionaire Investor
In 1993, David Einhorn tied the knot with Cheryl Strauss, a
financial reporter and media consultant. They raised three children together
before divorcing in 2017. Einhorn currently resides in Westchester County, New
York.
Politically, Einhorn aligns with the Democratic Party and
has actively supported Democratic campaigns, in contrast to his parents, who
lean towards Republican donations. Despite his political affiliations, Einhorn
co-hosted a fundraiser for the Keeping America Competitive PAC in 2012, led by
moderate Republican Leonard M. Tannenbaum. In a surprising move for a
billionaire, Einhorn reportedly drives a Honda Odyssey. Additionally, he
engages in virtual stock trading contests as a founding Master Player of
Portfolios with Purpose.
Investing, Philanthropy, and Poker Success
As of March 2019, Forbes magazine estimated David Einhorn's
net worth to be around $700 million. Einhorn is deeply involved in
philanthropy, serving as a major contributor and board member of the Michael J.
Fox Foundation. He donated over $650,000 of his poker winnings in 2006 to this
foundation. Additionally, Einhorn is on the board of the Robin Hood Foundation
and supports various charities in the New York area. Following the principles
outlined in his book "Fooling Some of the People All of the Time,"
Greenlight Capital donated all profits from shorting Allied Capital stock
(totaling $7 million) to several organizations, including the Tomorrows
Children's Fund, The Project On Government Oversight (POGO), and the Center for
Public Integrity (CPI).
In 2012, Einhorn generously donated his winnings from the
World Series of Poker Big One for One Drop Tournament ($4,352,000) to City
Year. He has also achieved success in poker tournaments himself, finishing 18th
in the 2006 World Series of Poker Main Event and 9th in the $50,000 No Limit
Hold'em High Roller event in 2019. As of 2023, Einhorn's live tournament
winnings rank him 21st in the New York area and 156th overall in the USA,
according to all-time rankings.
