April 15 (Bloomberg) -- Greg Coffey, who manages $7 billion at GLG Partners Inc., may leave to start his own hedge fund, two people with direct knowledge of the matter said.

Coffey quit yesterday, then withdrew the resignation today, GLG said today in a regulatory filing. The manager, who works in London, still intends to start his own firm, said the people, who asked not to be identified because negotiations are ongoing.

The company, which oversees $24 billion, is talking with Coffey about ``a range of options for the future,'' according to the U.S. Securities and Exchange Commission filing.

Neither GLG, which is managed from London by Noam Gottesman and Emmanuel Roman, nor Coffey could be reached for comment.

Coffey, an Australian, runs five of the firm's hedge funds. His GLG Emerging Markets Fund returned 51 percent in 2007 and was named the macro fund of the year by EuroHedge magazine. It has dropped 5.5 percent this year, according to data compiled by Bloomberg. Coffey started with $250 million under management when he joined GLG in 2003.

GLG also said in the filing it restated two years of earnings, leaving it with losses.

The company posted a $341.7 million loss for 2007, reversing net income of $59.3 million, after auditors said the company should change the way it accounted for profit payments to executives, according to the regulatory filing. Net income for 2006 was cut 56 percent to $158.1 million. The restatement didn't affect the firm's cash position.

GLG fell 76 cents, or 7.1 percent, to $9.95 at 2:51 p.m. in New York Stock Exchange composite trading. The stock has fallen 27 percent this year, compared with the 9.3 percent decline in the Russell 1000 Index.

Profit Agreement

GLG was founded in 1995 as a division of Lehman Brothers Holdings Inc. and became independent in 2000. The firm went public in November 2007 through a reverse merger with New York- based Freedom Acquisition, a special-purpose company formed to pursue takeovers.

In 2006, GLG entered into agreements with key executives that made them limited partners and gave them a cut of the firm's profits, according to the filing. It followed U.S. accounting rules and treated the payments as profit distributions that weren't deducted from net income. At the same time, the firm presented investors with pro forma financial reports that reflected the impact of such payments on net income.

GLG changed its profit reporting at the advice of its outside accounting firm, Ernst & Young LLP.

To contact the reporters on this story: Tom Cahill in London at o tcahill@bloomberg.net; Miles Weiss in Washington at mweiss@bloomberg.net

Last Updated: April 15, 2008 15:53 EDT