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Greenlight Re Sees $185 Million IPO

Laurie Kulikowski

Hedge fund manager David Einhorn's reinsurance company is getting closer to an IPO.

Greenlight Capital Re, a Cayman Island-based firm, could raise $185 million by selling 10.25 million shares to the public, according to an updated filing with the Securities and Exchange Commission on Wednesday.

The reinsurer, formed out of Einhorn's investment management firm -- New York-based Greenlight Capital -- anticipates pricing the shares at between $16 and $18 each, the filing says.

Along with offering shares to the public, Greenlight Re is selling $50 million worth of super-voting Class B shares to Einhorn in a private placement transaction.

Greenlight Re expects to have 28.2 million shares of common stock once the IPO is completed.

The move points to another way hedge fund managers and private-equity firms are accessing the public markets for capital without having to offer extensive detail about their investments.

Blackstone said in March that it plans to raise $4 billion by selling about 10% of itself. One month earlier, Fortress Investment Group(FIG - Cramer's Take - Stockpickr), raised $634 million by selling 34.2 million shares to the public. Citadel, Carlyle Group and Apollo Management are also said to have considered an IPO.

Greenlight Capital Re was formed in 2004 as a "specialty property and casualty reinsurer with a reinsurance and investment strategy," but didn't start underwriting until April 2006. It also manages a value-oriented investment portfolio that takes "long positions in perceived undervalued securities and short positions in perceived overvalued securities," the filing says.

It's hard to say whether the investment portfolio at Greenlight Re and Einhorn's hedge fund had similar holdings, but it wouldn't be shocking. The reinsurance firm's investment advisor, DME Advisors, is also controlled by Einhorn.

The reinsurer said that while its investment portfolio had a 24.4% return last year, in the first quarter it was down 4.2%.

Last year, the reinsurance company made a profit of $57 million through $74.2 million in premiums from nine contracts and a net investment income of $58.5 million.

But for the first three months of this year, the reinsurer had a net loss of $13.1 million, mostly because of investment losses.

Greenlight Capital had been one of the largest shareholders of the now bankrupt New Century Financial. Its 6.3% stake was worth $109 million at the end of last year but is now worth substantially less, as the California subprime lender filed for bankruptcy April 2. Einhorn also was on the board of directors before he quit in March.

Greenlight Re says it plans to use the IPO proceeds to "increase the underwriting capacity of its reinsurance operations."

Underwriters for the IPO include Lehman, UBS, Citi, Dowling & Partners and Fox-Pitt, Kelton. Greenlight expects to list on the Nasdaq under the symbol GLRE.

A spokeswoman for Greenlight Capital declined to comment.