Morning Brief: Greenlight Sharply Cuts its Net Long Exposure

April 04, 2018   Stephen Taub

David Einhorn's underperforming hedge fund slashed its net exposure, according to a letter the fund manager's firm sent to clients.

Greenlight Capital has sharply cut its net exposure. The long-short hedge fund, managed by the firm of the same name, entered April at 29 percent net long — 111 percent long and 82 percent short. This is way down from its 51 percent net long position just three months earlier.

The fund lost 13.6 percent in the first quarter. In its first-quarter letter to clients, obtained by Alpha, David Einhorn’s firm says that just due to losses his funds’ exposure would have risen to 148 percent long and 105 short, for a net long position of 43 percent.

"So far, the exposure reduction has been helpful," the letter added, noting that year-to-date trading has led Greenlight to avoid an additional 1.5 percent of losses. At this magnitude, investors probably wouldn’t have noticed the difference.

Greenlight also said in the letter that it closed out two long positions and two short positions. For example, it unloaded its stake in Chemours, the spinoff from DuPont, at $31.62 per share. It took its stake in the fourth quarter of 2015 at an average price of $6.97.

The hedge fund also sold its shares in Uniper, a German energy company spun out from E.ON. After the Finnish company Fortum made a bid for the company, Greenlight sold its stake at nearly 23 euros per share, more than double what it paid in the third quarter of 2016.

On the short side, Greenlight covered two losing bets: Swedish technology company Hexagon and equipment rental company United Rentals.

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Shares of streaming video company Spotify Technology closed at $149.60 on Tuesday, up 13.33 percent in its first day of trading after an unusual initial public offering (IPO). Unlike most IPOs where the company and sometimes insiders sell shares to the public, in this case shares of the Swedish company simply started to trade in what is called a direct listing. Chase Coleman’s Tiger Global Management owns more than 12.8 million shares, or 7.2 percent of Spotify’s total ordinary shares, according to a regulatory filing dated April 3. Of that sum, 1.255 million shares were registered. The shares are majority owned by Tiger Global Private Investment Partners IX, L.P. (PIP IX). In January, we reported that D.E. Shaw sold its stake of 12,000 shares in Spotify.

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Point72 Ventures was one of four investors to lead the $21 million Series B funding of DriveWealth, a fledgling financial technology company, according to businessinsider.com. Point72 is the venture capital unit of Steven Cohen’s family office, Point72 Asset Management. Another one of the investors is Raptor Group Holdings, the family office of Jim Pallotta, a previous member of the Rich List when he was a vice chairman of Paul Tudor Jones II’s Tudor Investment Corporation, where he managed over $10 billion in long-short equities.

 


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