Porsche 1 - Hedge Funds 0
Porsche Secretly Builds Up a Position
In the past Porsche has been compared to hedge funds for its aggressive management of currency risk management. Now it seems they have left a few hedge funds without a chair by secretly building up a 74% stake in Volkswagen.
The sports car giant Porsche has pulled off one of the greatest share killings of all time in a coup that has left some of the world's largest hedge funds nursing combined losses that could total $20bn (£12.6bn).
The vast sum was won and lost in bets on the share price of Volkswagen. While Porsche has been building a secret 74 per cent stake in its rival, the hedge funds have been betting that the shares will fall. The shares soared by 400 per cent in two days, leaving Porsche with a huge profit and the hedge funds – some of which are based in London – with losses that could drive them into bankruptcy.
City traders were stunned by the audacity of Porsche's move, although there is no suggestion that it broke German law or trading regulations.
The sudden rise in Volkswagen's share price – from about €200 to more than €900 – was triggered by the announcement at the weekend of Porsche's share-buying. The hedge funds had short-sold the shares – in effect a bet that they would fall – and so were left huge losses by the rally. Read More...
Here is another piece on this topic from Reuters:
Hedge fund manager David Einhorn's Greenlight Capital suffered heavy losses in his portfolio when German carmaker Volkswagen's shares spiked 82 percent on Tuesday, people familiar with his portfolio said.
The German carmaker briefly zoomed past Exxon Mobil to become the world's biggest company by market value as hedge funds who bet Volkswagen's price would drop further were forced to cover their positions.
Carmaker Porsche Automobil Holding SE (PSHG_p.DE: Quote, Profile, Research, Stock Buzz) surprised the market by announcing it had effectively gained control of 74 percent of Volkswagen's voting shares.
Einhorn's Greenlight Capital L.P. had already lost 16.4 percent in the first nine months of the year, Einhorn told investors in a letter on October 1. He said Porsche was one of nine losers in the portfolio that each cost more than one percent of capital in the quarter. Read more...