Red Flag Over Greenlight Re
Hedge fund manager David Einhorn has found an intriguing way to tap into Wall Street's sudden interest in hedge fund IPOs.
Earlier this week, Greenlight Capital Re, a small reinsurer backed by Einhorn, filed for a $175 million initial public offering. But the Cayman Islands-based firm isn't much of a reinsurer. The two-year-old company didn't even begin underwriting policies until last April.
In fact, most of the $39.6 million in profit Greenlight Re generated last year came from its investment activities. And those investments were managed by DME Advisors -- the very same investment adviser that manages Einhorn's $4 billion Greenlight Capital hedge fund empire.
In essence, Greenlight Re looks a bit like a slimmed-down version of Einhorn's Greenlight Capital hedge fund. An investor who buys a share of the reinsurer is really banking on Einhorn's advisory firm making the same kind of shrewd investments it does for the hedge fund.On the surface, this sounds like an appealing situation. A Greenlight Re investor gets to invest in a hedge fund without needing a million dollars in the bank. But the real winner in the Greenlight Re IPO is Einhorn. The 38-year-old hedge fund manager is largest owner of the reinsurer's Class B shares, which have greater voting power than the Class A shares that Greenlight Re intends to sell to investors. And after the IPO, Einhorn will be entitled to buy even more Class B shares, further solidifying his control.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV