Monday, July 14, 2008

Greenlight Capital

An Ontario-based real estate development company has defeated claims brought in Canada's courts by the hedge fund Greenlight, to the effect that the development company's founder, Frank Stronach, has exercised excessive influence over the rest of its board, to the detriment of non-controlling shareholders such as Greenlight.

The company, MI Developments Inc., or MID, was created in 2003 when it was spun off from Magna International, an auto parts concern.

Greenlight owns more than 10% of MID shares, and it has contended that MID falsely held itself out to investors as a conventional real estate company, while turning itself into something a good deal more speculative. Specifically, it entered into challenged transactions with the Magna Entertainment Corporaton (MEC), a Delaware chartered company that owns and manages horseracing and gambling facilities in North America and Austria.

Greenlight lost both at the trial level, and more recently on its appeal. Here is the opinion.

I can't say I understand what it is all about. I'm still feeling my way through it. But I do have a sense that there's something important going on here and that understanding the issues in this lawsuit would have valuable ramifications.

As always, I'm open to your comments and assistance, dear readers.

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