VW shares halve as Porsche eases short squeeze

Discussion in 'Wall St. News' started by patchie, Oct 29, 2008.

  1. patchie


    VW shares halve as Porsche eases short squeeze
    Wed 29 Oct, 2008 12:23

    FRANKFURT (Reuters) - Shares in carmaker Volkswagen nearly halved on Wednesday after main shareholder Porsche took steps to ease a squeeze on shortsellers that more than quadrupled the stock in days.

    On Sunday Porsche said it had indirect control of 74.1 percent of VW, leaving less than 6 percent in the market and prompting a shortcovering rush that vaulted VW's market value to 278 billion euros (221.2 billion pounds) and its shares to a record close of 945 euros on Tuesday, compared with its weekend close at 210.85 euros.

    The stock fell as low as 491 euros in early Frankfurt trading on Wednesday, pulling Germany's blue-chip DAX index down 2.2 percent, despite-double digit percentage gains on other stocks after Wall Street's second best gain on record.

    "In order to avoid further market distortions and the resulting consequences for those involved, Porsche SE intends -- depending on the state of the market -- to settle hedging transactions in the amount of up to 5 percent of the Volkswagen ordinary shares," Porsche said in a statement.

    "This may result in an increase in the liquidity of the Volkswagen ordinary shares," it added.

    VW's fall shaved off roughly 600 points from the index on Wednesday, meaning it would otherwise be trading up nearly 10 percent, but for the Volkswagen effect.

    Deutsche Boerse , operator of the Frankfurt exchange, said late on Tuesday it would cut the weighting of Volkswagen shares in the DAX to 10 percent from Monday after VW's leap had distorted the index.

    Volkswagen shares had nearly doubled on Tuesday, rising above 1,000 euros at one point, briefly giving Volkswagen a market cap larger than the world's most valuable company, U.S. oil giant Exxon Mobil Corp , and increasing its weighting in the 30 member-DAX index to a hefty 27 percent.

    Shortsellers who rushed to close their positions after Porsche's announcement on Sunday were paying virtually any price to get their hands on the few remaining shares, even though Porsche insisted its announcement would allow short sellers to unwind their positions "without haste and without greater risk."


    Deutsche Boerse said in its statement: "By capping Volkswagen AG, the weightings of all other DAX constituents will be changed as well," and added that it would use closing prices on the electronic Xetra trading system on Friday as a basis for its recalculation.

    The stock exchange operator's decision "should give some relief to shortsellers in Volkswagen and is mainly positive for the DAX index," said a Frankfurt-based trader.

    There was wide speculation about which investment companies had been caught out by the short squeeze, and many banking shares fell as a result.

    Hedge fund manager David Einhorn's Greenlight Capital suffered heavy losses from a VW trade, people familiar with his portfolio said on Tuesday. The fund declined comment.

    Index provider Stoxx Ltd also said it would cut the weighting of Volkswagen shares in its main indexes and cut Volkswagen's free float factor to 0.3732 from 0.4963.

    "This decision reflects the changes in the shareholder structure of Volkswagen and results in a lower weighting of Volkswagen in the respective indexes," Stoxx said.

    (Reporting by Knut Engelmann, Christoph Steitz, Sarah Marsh and Christiaan Hetzner; Editing by Jason Neely/Will Waterman)

  2. Couldn't have happened to a nicer person.

    probably was all naked short.

    good riddance.
  3. gaj


    really? why do you say that?

    he was dead right on LEH, and donates a chunk of his profits to charity.

    AND goes long/short (which is why his fund had a negative return, despite kicking ass with the LEH short, both fundamentally AND with the money).
  4. patchie


    Yea, Einhorn steals millions and donates a few thousand to a charity to make himself feel better. Have you noticed how many of these crooks were charitable? I hear Ken Lay, Jeff Skilling, and Dennis Kosloski, etc....were quite charitable as well.

    As for Einhorn being dead right on Lehman, I find that amusing.

    1. Apologists always bring up successes in attempts to divert attention to the many screwups. Chanos still refers all the way back to Enron when he touts his successes. How come neither want to talk about failures they have had?

    2. Was Einhorn dead right about Lehman or, did Einhorn create the panic that made Lehman a self-fulfilling prophecy? Could Lehman have survived had the run on the bank not been executed?

    Just some random thoughts.
  5. patchie


    BTW, This was the best orchestrated pump and dump in history.

    Porsche locks up a majority of shares and then makes the announcement to run up the stock in a short squeeze. After the market is grossly over-valued they announce (out of charity - lol) that they will free up shares in the market. Of course that freeing up comes at a significant profit.

    Porsche pumped the stock and did so in broad daylight and then dumped the shares in full view - in an act of charity.
  6. Einhorn was dead right on LEH.

    He was saying it as far back as one year ago. You make it seem as if he created a panic that took Lehman down in a short period of time. Just not true.

    I don't know if he is a nice guy, asshole, charitable, or whatever, but he was very right about LEH.
  7. gaj


    einhorn's been dead right about LEH. he's been saying the same stuff on LEH for a LONG time, and took a little pain - both monetarily and verbal abuse - when the stock was still going up / not going down.

    and stealing? proof? any? bueller?
  8. 151


    I might not understand exactly what went on in this deal.

    If however GS did get shafted it is funny in a sick twisted southpark like way, that a german company NW really stuck it to a Jewish company GS.

    Wiki says Mr. Goldman was a german Jew who came to the US in the 1890's.

    I know its not truly funny. But the southpark guys could make it funny.
  9. patchie


    Little touchy regarding Mr. Einhorn are we? Einhorn lost big in VW, he lost to a charade played typically by hedge funds.

    In the days leading up to Lehman's demise Einhorn was touting his book on every rag and TV show he could find. He was selling his position to the public in order to exacerbate a collapse now that he witnessed the demise of Bear stearns.

    If you look back in history you could say that Einhorn was wrong many times but he rarely made the news on those errors, the apologists only want to tout success.

    As for him stealing, the jury is still out. I expect to hear more about how hedge funds have operated in the not to distant future. The SEC has long protected them but no more. The SEC can't because Congress and the DOJ are hot on this trail. There is an abundance of rumors out there involving the biggest of players (hedge funds) with regards to this market crisis and civil and criminal investigations.

    How is Greenlight treating their shareholders these days? Looks to me like the IPO was the high for this stock putting investors at a loss. If only Einhorn was as hard on himself in returning shareholder value as he is on others.