How much did SAC lose on Volkswagen?

W4rl0ck · Oct 30, 2008

Bravo Porsche!

Nicely played.

BTW NOTHING will happen to Porshe over this. Naked shorts get the screwing of a lifetime. It's ALL good.

mingsphinx · Oct 30, 2008

6 billion is way too low. Shares in Volkswagen surged past EUR 1,200 from EUR 200 before the squeeze ended. The funny thing is that the shorts appeared to be succeeding just before the squeeze was initiated. The losses were huge and this was a trade that SAC probably entered into only in October after they had liquidated their long positions. And now Steve wants to raise more money. Has anyone gotten a term sheet from SAC? What have they said about this?

Topsurfi · Oct 31, 2008

Quote from mingsphinx:

PorscheÂ¡Â¯s innocence or guilt is not the question here. There would be riots in Europe if the courts for some reason found in favor of the hedge funds and broke those trades. Even if Bafin did find Porsche guilty of breaking the rules, Porsche will be treated like a hedge fund and basically get slapped on the wrists with a token fine.

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here in Germany things are treated maybe a little different. My understanding is, that IF Bafin finds Porsche guilty of breaking the rules Porsche will be fined for that. But the much heavier part is that after that, hedge fonds who lost money on the trade can go to court against Porsche directly and claim to get their losses paid because the reason was Porsches miss-behaviour. Its simply German law, even if some people here are applauding to Porsche now. I don't know why people here hate hedge funds so much, I don't care about them. If there is a way to make money I take the chance. In my understanding from this situation the best thing is to short Porsche. Right now all those super smart traders have calculated how much Porsche will profit from the selling of the 5% stake at 500Euro or about thats why Porsche stock was lifted so much last 2 days. Problem is, they will never be able to keep that money and will most likely loose much much more.
But OK, I think I am the only one here thinking that way so I will shut my mouth now and let the other people cheer Porsche for how many Hedge funds they killed, bravo. Poor little boys.

bontrjd · Oct 31, 2008

Quote from Spaceman3:

What the hell does Cohen have against jugglers?
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Hiliarious!

W4rl0ck · Oct 31, 2008

Get over yourself Hansel.

What part about naked shorts don't you understand?

So they got ass raped. You play with fire you might get burned. QED.

Quote from Topsurfi:

here in Germany things are treated maybe a little different. My understanding is, that IF Bafin finds Porsche guilty of breaking the rules Porsche will be fined for that. But the much heavier part is that after that, hedge fonds who lost money on the trade can go to court against Porsche directly and claim to get their losses paid because the reason was Porsches miss-behaviour. Its simply German law, even if some people here are applauding to Porsche now. I don't know why people here hate hedge funds so much, I don't care about them. If there is a way to make money I take the chance. In my understanding from this situation the best thing is to short Porsche. Right now all those super smart traders have calculated how much Porsche will profit from the selling of the 5% stake at 500Euro or about thats why Porsche stock was lifted so much last 2 days. Problem is, they will never be able to keep that money and will most likely loose much much more.
But OK, I think I am the only one here thinking that way so I will shut my mouth now and let the other people cheer Porsche for how many Hedge funds they killed, bravo. Poor little boys.
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mingsphinx · Oct 31, 2008

Oh baby! Sweet heart hunny buns! Are they all like you where you come from?

Even if the squeeze happened in the United States, no one will be getting their money back. Go to court against Porsche? Sweet child, at this point SAC does not have the money to take on one of Germany's industrial champions on its home turf. Even if SAC has the fire power, do you really think that the Merkel administration is going to side with SAC on this? There will be investigations and more investigations, but what do you think will come of it?

It was the brokers who bought in on behalf of their clients and under the rules of any stock exchange they do not have to bother with the price they closed out the positions. I do not think that any of those affected were allowed to buy in at a price anywhere near EUR 500 a share.

Clearly Porsche did not act alone on this. Continental European ambivalence to 'locust capitalism' is well known and no one is going to feel sorry for SAC. The money has been taken. Steve is not getting it back.

Quote from Topsurfi:

here in Germany things are treated maybe a little different. My understanding is, that IF Bafin finds Porsche guilty of breaking the rules Porsche will be fined for that. But the much heavier part is that after that, hedge fonds who lost money on the trade can go to court against Porsche directly and claim to get their losses paid because the reason was Porsches miss-behaviour.
More...

mingsphinx · Oct 31, 2008

Loophole.

Porsche's Volkswagen Stake Sparks Call for Disclosure (Update1)

By Karin Matussek

Oct. 31 (Bloomberg) -- Porsche SE's use of options to build a stake in Volkswagen AG took advantage of flaws in German securities laws and companies should be forced to disclose transactions sooner, lawyers and investors said.

German capital market rules don't require companies to disclose holdings until they have a legal right to acquire the stock, said Thomas Moellers, a capital markets law professor at Germany's Augsburg University. Schaeffler Group earlier this year similarly used swap rights to acquire 28 percent of Continental AG before disclosing a takeover bid.

``Porsche was able to use a loophole here, and the lack of transparency distorted the DAX and led to unfair losses by others,'' Moellers said in an interview. ``This example, like the Schaeffler-Conti case, shows that regulatory action is needed.''

Porsche said Oct. 26 that it held 42.6 percent of Volkswagen AG's shares and had secured so-called cash settled options for another 31.5 percent. Volkswagen shares soared almost fourfold the following two days and trading in Volkswagen is being probed by BaFin, Germany's financial-market regulator. Germany's benchmark DAX index rose 12 percent on Oct. 27 and 28 as Volkswagen's shares were pushed up by the Porsche bid.

The tactics have revived criticism that German rules are too lenient. Schaeffler's move to employ swaps in the Continental takeover prompted companies including E.ON AG and Daimler AG to urge the government in July to strengthen disclosure standards.

Frank Gaube, a spokesman for Stuttgart, Germany-based Porsche, declined to comment. He has said previously the company rejects allegations that it manipulated Volkswagen's share price or that it violated securities laws.

Short Sellers

Wolfsburg, Germany-based Volkswagen rose 12 euros ($15) to 512 euros in Frankfurt trading at 10:24 a.m. Porsche fell 1.57 euros to 65.42 euros.

Short sellers, who bet that Volkswagen's price would fall, were forced to buy from a shrinking pool of Volkswagen stock to close their positions in a so-called short squeeze. Short-selling occurs when investors borrow shares and then sell them on the hope that the price will fall.

``The short-sellers got the sharp end of this stick, but the general point is it is not just an issue for short-sellers, but also for the traditional long-term investor,'' said George Dallas, corporate governance director at F&C Asset Management Plc, which oversees the oldest U.K. investment fund. ``Majority control by Porsche was achieved without the minority shareholders being aware, and the market and share price distortions that resulted from the limited free float of shares are not the type of thing long-term investors would like to see.''

Cash-Settled Options

Porsche said that it had cash-settled options equivalent to 31.5 percent of Volkswagen, and that it aimed to control 75 percent of the carmaker in 2009. With the options, Porsche would receive the difference between the undisclosed underlying strike price and the market price for the shares on the day of settlement. ``The shares will be bought in each case at market price,'' the company said in a statement.

Until Oct. 26, Porsche had said it was aiming only for a stake exceeding 50 percent, and Chief Executive Officer Wendelin Wiedeking said at the Paris Motor Show this month that a stake of as much as 75 percent would be ``not realistic'' because of market turmoil.

While current German disclosure rules meet minimum European Union rules, the U.K. and Switzerland have stricter standards on the use of derivatives.

U.K. Rules

``Porsche couldn't have done this in the U.K., and that's what people in the markets overlooked,'' said Jochen Kindermann, an attorney with Simmons & Simmons in Frankfurt. Investors ``were surprised to hear how few shares were left available all of a sudden.''

The U.K. financial regulator last week said it would adopt rules that force investors that use derivatives to build large stakes in companies to disclose their positions when they control options equivalent to a 3 percent stake in a company.

Kindermann, who advises hedge funds, said he has been contacted by numerous clients this week about the Volkswagen turbulence.

Porsche, which first bought the stock in 2005, had to make a mandatory takeover bid under German law when it boosted its stake above 30 percent in March 2007. This signal wasn't understood clearly by investors and hedge funds, according to Kindermann.

``The crucial issue here is the timing of Porsche's latest disclosure on the 75 percent,'' Kindermann said. ``They were just able to pick and choose the date and time for that one at will.''

Ruediger von Rosen, managing director of the association of German listed corporations, DAI, said any new regulations should be proposed on the European level.

``If hedge funds really fell flat on their face here, I'm not sure that's a compelling reason for new regulation,'' von Rosen said. ``There are always winners and losers in each situation. Everybody has known since 2005 about Porsche's ambitions.''

To contact the reporter on this story: Karin Matussek in Berlin at kmatussek@bloomberg.net

Last Updated: October 31, 2008 05:30 EDT
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flytiger · Oct 31, 2008

you know, I was short Bear, covered, rolled, got short again, and then the ten dollar offer came in. I made money, but not as much as I should have.

Now, it seems the Director of Enforcement, Linda Thompsen, tipped her predecessor, Stephen Cutler, who was employed by JPM per his law firm.

Foul??? Yes. Does she got to jail? Hope. Do I get my money back? MMMMMMMMMMMMMMMMMMMMMMMMMM

No. Get over it. We are playing against Governments, and you have to factor that in.

slowdown · Oct 31, 2008

so do we have a reliable source that SAC was involved with size?

What happened to him being in cash and telling his traders to go home and come back in Jan?

TSGannGalt · Oct 31, 2008

Quote from slowdown:

so do we have a reliable source that SAC was involved with size?

What happened to him being in cash and telling his traders to go home and come back in Jan?
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I'm no official spokesperson...

But I'll start with a question with... how the hell does it affects all of your trading. I wonder why people trade to start with...

That said... the loss SAC had is not huge as all you suckers wish. The majority of the reason is all the brokerage short list's size limit has reducing due to the macro-economical issue. The brokers have a larger risk of holding a "normal" position size within their short list so they reduced it.

Also, the volatility and uncertainty (of course, the market tendency being unstable has caused the quantitative risk to increase = less size) caused the market exposure to reduce along with it.

That said... (again)... the decision to hold off on a lot of their models (news about going cash) caused the impact of the outlier "manipulation" to the minimum.

They've been hit... but not hit in a sense of "being pounded".

If you are envious of their success, take that energy to become a better trader. You're wasting your time.