28 October 2008

Hedge Fund Schadenfreude

Well, something interesting happened today; for a few hours today, Volkswagen had the largest market capitalization in the world, exceeding that of Exxon-Mobil.

It appears that what happened is that Porsche, which had previously held 42.6% of VW shares, cut a deal to increase this to 74%, and just announced it.

Combined with the German state of Lower Saxony's slightly more than 20% share in the auto maker, this meant that only 5% of the shares were available, and there were a bunch of short sellers who bid up the stock, because there was not enough out there to cover their short sales.

My take is that the hedge funds can go Cheney themselves. Their stock in trade is to make money from just such of a lack of transparency, they call it "market asymmetry," and they just lost money on a lack of transparency.

Hoist by their own petard....Heh.

There is going to be an German regulators looking into this though.

My guess is that Porsche did this in this way because they wanted to punish the short sellers.

They succeeded, but I'm not sure if all is in accord with German securities law.


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