David Einhorn, president of New York-based activist hedge fund operator Greenlight Capital Inc., has resigned as a director of Irvine-based New Century Financial Corp.
Greenlight is the second-largest shareholder at embattled subprime lender New Century. The hedge fund controls 6.3% of New Century.
New Century has seen a precipitous drop in its stock in recent weeks, following a string of bad news.
This week alone, the shares are down more than 60% on speculation by analysts that the company could file for bankruptcy protection.
Einhorn was added to New Century’s board just a year ago, following a battle with the company’s management. The dissident shareholder had threatened a proxy battle against New Century prior to his appointment.
Einhorn had expressed concerns in early 2006 that the subprime mortgage lender could be worth more on Wall Street. He also believed that New Century’s conversion to a real estate investment trust in 2004 was a bad move.
Along with the board appointment, New Century in early 2006 revised its rules to allow Greenlight an exception to increase its stake in the company from about 10% to as much as 19.6%.
Since then, Greenlight has reduced its stake in New Century by roughly 2 million shares, according to filings with the Securities and Exchange Commission.
