More on the VW Short Squeeze

I find this ridiculously fascinating. So hedge fund managers had shorted about 12% of the VW stocks, which means that they presold VW stocks at one price and expeted to make a rpofit when they buy the same stock at some later time for a lower price. They hand the stock, bought cheap, to the party they were promised to, and they pocket the difference as profit.

12%.

What they didn't know was that Porsche secretly stashed their holdings of VW up to 74.1%, and with Lower Saxony holding 20.1%, the hedge fund guys now have to chase after 5.8% VW stocks.

Supply, meet demand. 5.8% v 12%. Something had to give.

The downside of a short is of course that your lose severity is theoretically unlimited. So this little venture cost the Hedge Fund guys something likle $45-50 billion.

The ironic thing is that the only reason Porsche pulled this off is because there are no disclousre law in Germany, and this as prompted the hedge funds guys to clamor for more government regulation. Pretty rich coming from a group of funds who exist precisely to avoid government regulation.

But to give you a sense of how surreal and ridiculous the whole thing is:

And as the price of those precious shares quadrupled, Porsche made a paper profit of more than £100 billion, dwarfing the money it makes from selling cars.

That's right, Porsche the financial company.