"The Mother of All Short Squeezes"

FT, via MR:

Volkswagen briefly became the world’s largest company by market capitalisation on Tuesday after an extraordinary surge in its share price driven by a near-panic by hedge funds and other traders to stem losses on positions betting on a fall in the stock.
...
One London-based auto analyst said: “I have hedge fund managers literally in tears on the phone.”

As I understand it, The Hedge Fund guys figured out that earlier on when Porsche was given a large portion of VW, the "value of Porsche's stake in VW exceeded the enterprise value of Porsche" (from MR)- therefore they shorted VW and longed Porsche. Low risk, high yield. Easy money.

Except that Porsche had been secretly cornering VW stocks to the extent that they now own 74.1% of VW. Given that lower Saxony owns 20.1% of VW, all the hedge fund managers have to chase after the remaining 5.8% of the VW stocks to cover the shorts.

So for a brief moment, VW had a market cap of $360 billion, and the hedge funds stand to lose $30-40 billion over this busted trade.