Short squeeze on volkswagen causes shares to rise 2000%

[Deleted User]

The high gambling American investment banks Morgan Stanley and Goldman Sachs rather enjoy selling lots of shares they don't own to create free money as the drops in share prices create self fulfilling prophecy's on companies (NRK, B+B etc etc).

Little did they know that one company they did this to has interests in it from the CEO of another major company - Porsche. While the naked options kept appearing on the market selling stock in a fire-sale fashion. Mr Porsche lapped them up a saucer of milk to this fierce predator. They have gone from owning 32% to over 70% with 20% owned by another family there isnt much stock on the market to buy.

Now the yankee barrow boys must make good on there promise. Volkswagons stock price has a market capitalisation of bigger then most countrys GDP so big it has a huge effect on the DAX index itself.

So for all of you unlucky people who had to sell investments to live off at possibly the worst time in the last 6 years to sell. For those that lost money owning UK bank shares that were forced at the hands of these highly leveraged gamblers into state control and for others to lose credit ratings and thus have to raise capital. At least a small ounce of justice perhaps.

Notice how the speculators now cry foul when they dont get their own way.

May I suggest Mr Porsche that you delist VW and force the speculators to have to pay dividends on the stock they dont own for all eternity.

Reaper

Interesting, I had not heard of that before. However according to this article your figures are a little inflated.

The share price went up 150% on Monday then another 93% on Tuesday.
Porche now own 42.6% of the company and its aim is to get over 50% this year

EDIT: Ah, another article says they have another 31.5% in options which explains the difference.

tradetime

There's no confirmation that either bank were heavily short VW, in fact as far as I am aware there is more speculation that the fall in Morgan's share price is related to the news that Mitsubishi UFJ plans to raise $10.5 billion in capital which makes investors feel much less comfortable about their capital infusion in Morgan.

[Deleted User]

The stat I used was what a newspaper would use a figure to grab the headline.

It is true though since the bear market has begun over 18 month back the shareprice has gone from just over 10 dollars to 230 dollars per share.

Though this huge increase obviously hasn't just happened recently its over a period of time it is still a huge one and the recent doubling in one day just show the power of a bear squeeze. It will happen on more companys as more hedgefunds go belly up over the next year or two as cash rich companys like Berkshire Hathaway and the super rich dive in to buy ten dollar notes for 50 cents.

When newspapers talk about house price drops they will always use peak to trough values and also pull out the worst figures they find from highstreet retailers when talking of recession. The fact is over the next year some highstreet retailers will have profit growth of over 20% and some peoples houses might go up in price too despite the majority going down. Maybe not all banks will get nationalized and maybe some companys that are reporting no profits now might be reporting record profits in 2 years time.

I just wanted to highlight this particular story to show its not all gloom and doom no doubt some lucky VW stockholder/factory worker renting a room in a not so nice area in germany, has just won the lottery. Also no doubt a lot of yankee barrow boys will be sacked over the same event.

chopperharris

Its actually quite a good idea from porsche to buy up ownership.

It will reduce the operating costs , sure they share the same underpinning in vw with other german car companies like audi.They can use their production lines ,and install older tech from porsche in mainstream cars along the vag family.

Even have as an ultimate goal the "badging" of certain cars as porscher tech variants as special models.

Looks like they have came full circle , porsche created vw in wierd way.

Im sure some car guru will mention the shared manufacturing that is already going on across the range.

Brian_Bullocks

Yant1 wrote: »

Mr Porsche lapped them up a saucer of milk to this fierce predator. They have gone from owning 32% to over 70% with 20% owned by another family there isnt much stock on the market to buy.

Porsche originally owned 43%, and a German state owned 20%.These traders must be loonies with money to burn. Are they so thick to not know this stock is illiquid?

tradetime

Porsche originally owned 43%, and a German state owned 20%.These traders must be loonies with money to burn. Are they so thick to not know this stock is illiquid?

Hmmn, if your figures are accurate, (and I'm not disputing that btw, I have no idea) it would seem a bit of an odd short for an institution to put on since the auto sector was likely widely shorted anyway better them than me. Whatever the facts it is a pretty good illustration that short selling is not without considerable risk, like any other trading endeavor homework must be done.

purch

This is from Bloomberg:

Volkswagen, Europe's biggest carmaker, is the most shorted stock in Germany's benchmark DAX Index. The so-called short squeeze today pushed the value of Wolfsburg, Germany-based Volkswagen's common shares as high as 296 billion euros ($370 billion), more than Exxon Mobil Corp.'s $343 billion at yesterday's close in New York, according to data compiled by Bloomberg.

About 12.9 percent of Volkswagen's common stock was on loan as of Oct.. 23, mostly for short sales, the highest proportion of any company on the DAX, according to London-based Data Explorers.

This comment, and many like it on the subject is quite illuminating. :eek:

Apparantly it's Porsche who are in the wrong, NOT the shortsellers :rotfl: :rotfl:



"The regulator needs to investigate,'' said Piers Hillier, head of European equities at WestLB Mellon Asset Management U.K. Ltd. in London. "The bigger question has to be why they have not done so already. If ever there was an example of market manipulation, this is it. Porsche's stake-building process is at best obscure.''

What a crazy mixed up world these "Masters of the Universe" live in.......

tradetime

Apparantly it's Porsche who are in the wrong, NOT the shortsellers :rotfl: :rotfl:

I saw that reported on the wires yesterday, but am not sure what exactly the problem is. As I understand it, Porche a major stakeholder in VW were simply hedging their position by employing an options strategy, no specifics were given. Looks like short sellers were just caught with their pants down, shorting a stock with substantial % of shares held by small number of stakeholders increases risk of it blowing up in your face.

Brian_Bullocks

tradetime wrote: »

Looks like short sellers were just caught with their pants down, shorting a stock with substantial % of shares held by small number of stakeholders increases risk of it blowing up in your face.

"This is without question the biggest single loss on a single stock in the history of hedge funds. It's a bloodbath," said Laurie Pinto, a broker at North Square Capital.

Reaper

Peston has a piece on it in his blog which is worth reading.