Lehman Brothers Short Thesis (Ira Sohn)
David Einhorn / Greenlight · 2008
"Lehman's balance sheet is opaque and undercapitalized; its marks on illiquid assets are not credible."
In May 2008, David Einhorn presented a blistering short thesis on Lehman Brothers, exposing a massive $32 billion discrepancy in their commercial real estate portfolio. He proved the bank was functionally insolvent months before its spectacular collapse.
Lehman was heavily leveraged, hiding billions in toxic CDOs and commercial real estate loans. Einhorn dissected their quarterly earnings calls, pointing out that CFO Erin Callan was giving contradictory and evasive answers regarding their Level 3 (illiquid) assets. Lehman had refused to mark down their real estate portfolio to reflect the crashing market, meaning their reported equity was a complete fiction.
What specific asset class did David Einhorn focus on to prove Lehman Brothers was hiding massive losses?
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The explanation above is written with AI assistance. These are the originals — go to them to check it.
- The Lehman Short Thesis — 'Accounting Ingenuity' (David Einhorn, 2008)House overview / Einhorn speech
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