Porsche and VW share row: how Germany got revenge on the hedge fund 'locusts'

I recently read a superb article about the risks of short selling, and how hedge fund managers who engaged in it are about to become extinct.

Here's a short excerpt:

"I have had hedge fund managers literally in tears on the phone," said one London-based analyst yesterday. Others likened the Porsche disclosure to a "nuclear bomb going off in our faces", describing the resulting losses as "a bloodbath".

Read the full story : Article on hedge fund losses

I love reading stories like this, because it reaffirms my faith in the free market. I believe the banks that accumulated toxic debt should have been allowed to fail, as these hedge funds will no doubt fail.

Im sure that this is one story that almost everyone will enjoy reading, as the description of how Porsche nailed the speculators is put across in a really entertaining manner! This is also a story that everyone from across the political spectrum will enjoy; libertarians will be glad to see the markets taking out the speculators naturally and socialists will be glad to see rich men losing money.

Enjoy!

I'm glad someone finally mentioned this. I caught the story somewhere and saw VW go up oh about 800% in a session.

I'm not quite sure it's the free market working though. It seems to me like it may be some "burn the shorts" manipulation. I've heard some questions about if Porsche had the capital or available financing ( with this credit crisis?) to really go through with the increased stake in VW. Don't get me wrong, I'm not going to shed any tears over hedge funds falling, but market manipulation is market manipulation. If Porsche has the money ( i don't think they have the capital to pull it off) or the financing (how likely is that in this environment?) then kudos. If they don't then this was just a morally abhorent as the banks lying about their balance sheets all over the world.

EDIT
Read the article, wow I didn't know that Germany's disclosure laws were that weak. Why the hell would you short anything in that country? Or for that matter buy anything you don't know who owns what amount of a company.

[edit on 31-10-2008 by jefwane]

Oh absolutely this was a tactical decision by Porsche.

They had 74% of VW already. They needed just another percent... why would they reveal they wanted it?

Well considering they had been buying at 200 Euros per share and now had a 74% stake, they had almost nothing to lose. By driving up the VW share price, Porsche made a massive killing.

I wouldn't call it market manipulation, but it was a textbook tactical play. Porsche didn't do anything illegal... they just cheekily revealed their hand to show that short positions exceeded the amount of free shares, so sending them into a total spiral.

I just wish I had bought VW a couple of weeks ago!

I was about to post this topic but I was too late. lol Anyhoo, I feel sorry for the suicide of the German billionaire that lost a lot because of this but reading this report was a real thrill. Stories of revenge never gets old.

Originally posted by 44soulslayer
Porsche didn't do anything illegal...

According to German law, that is.

I like this part:

After a month in which Gordon Brown and other political leaders have called for an overhaul of global financial regulation, the Porsche affair has rammed home the point that, now as never before, the world needs a new financial policeman to make sure everyone plays by the same rules.

www.telegraph.co.uk...

Beware!

[edit on 1/7/2009 by eldard]