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,34 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