Saturday, November 01, 2008

Porsche Squeezes Shorts on VW

Ok, I'm caught up on the Economist (for now). This weeks issue included this story which I also had managed to miss this week, Porsche breaks the hedge funds. Porsche had been buying shares in VW for years and this week set off the largest short squeeze. Porsche tied up almost all the shares and short sellers needed them so had to buy them at any price. For a short while this week VW was the most valuable company (by market value) in the world.

"Porsche may have made paper gains of €30 billion-40 billion in what one analyst described as 'one of the most brilliantly conceived wealth transfers ever'"

Now people are swooning over Porsche's CFO. "Helping generate near-20 pretax margins at a niche sports car manufacturer like Porsche is anything but easy, but pulling off the acquisition of the world's third largest carmaker in roughly three years without going hat in hand to your shareholders for funding is something entirely different. Haerter's magnum opus started back in September 2005 -- when Porsche began to buy into Volkswagen -- orchestrating the first stealth takeover via the use of call options settled in cash as opposed to stock."

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