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Hedge funds make £13bn loss - Porsche officially the sneakiest F'kers of all

I

iGav

macrumors G3
Original poster
Robert Peston said:
Inevitably some traders and investors are calling foul
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I... CAN'T... HEAR... YOU... the sound of all those executive toys been thrown from their prams is deafening. 😀

Before Porsche's announcement, many traders had been betting on VW's shares falling
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*Muffles laughter*...

They had borrowed VW shares and sold them in the market, planning to buy them back when the shares had fallen, return them to the lender and pocket the difference.
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*I cannot take much more Captain*...

But what actually happened was that the shares rose as a result of Porsche's effective takeover and the traders found themselves forced to buy the shares at any price to close their positions.
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*Ahahahahahahahahahahahahahahahahahahahahahahahahahahahahaha*

Quick, someone call Bob Geldof!
 
Trying to short shares in a company where another company holds 50% of the shares and is cash rich seems to me one of the more stupid bets to take on.
 
Peterkro said:
Trying to short shares in a company where another company holds 50% of the shares and is cash rich seems to me one of the more stupid bets to take on.
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From what I can make out, until last Sunday, traders were under the impression that Porsche only owned 35% of VW, whilst the state of Lower Saxony owns 20.1%.

Then later on the Sunday, Porsche actually announced it owned 42.6%, as well as options for a further 31.5%, which they were't required to disclose because they were held and settled in cash (and are not required to be disclosed in Germany), all this meant that it turned out that there was only somewhere in the region of 5 or so % of shares available, hence the sneaky of sneakiest bit. 😛
 
I haven't looked at the prices today but I assume they're all fighting to buy that last 5%,capitalism in tooth and claw indeed.

( it appears Porsche are going to sell 5% of their shares to get the shorters out of the hole which is a shame)
 
If there are less shares available than the traders need to close their positions, then obviously some of them won't be able to close their positions, no matter what price they are willing to pay. So what happens to the traders when they can't close their positions? Do they get sent to prison?

I find derivatives so hellishly complicated... 😕
 
Truly wonderful. Hopefully Porsche will only offer help in return for shares in the hedge funds themselves. Any hedge funds who think it's still a good idea to short individual stocks should learn from this. There are always bigger fish out there, and you have no idea what deals they may already have in place.
 
especially funny is how the short seller amount was around 12 percent or something .. which is quite a bit more than 5-6% which were actively available

and how they bet on VW loosing value since for months porsche is rumored to buy up more shares and take over .. and mentioned over and over again in the media .. and yet this hedge fonds manager still fall into this trap ? especially with a company where lot of shares are concentrated in few spots ?

for porsche it's of course pure money making .. they are now gonna sell 5-7% of the shares to those who need them (at a stock price nearly double as high) and then next year when the stock is down again they gonna start buying again


scary fact: VW stock rose so much that in the end 30% of the german dax was just VW ... and VW happen to be the most valuable company of the world
 
Peterkro said:
( it appears Porsche are going to sell 5% of their shares to get the shorters out of the hole which is a shame)
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You can bet that Porsche will make metric assload of money in doing that. They will be laughing all the way to the bank. Hell, for few days VW was the most valuable company in the world, surpassing Exxon-Mobil. Their stock-price sure looks interesting: link

I honestly don't have much sympathy for the funds and traders. They make their money by gaming the system and selling things they don't actually own. And now they whine when Porsche soundidly thrashed them at their own game. Well, cry me a river.

I bet that Volkswagen will be used as a subject of education and research in the future.

EDIT: From the linked BBC-article:

It meant that because Porsche had not declared the proportion of VW shares it controlled, traders may have been indirectly and inadvertently borrowing shares from Porsche, selling them to Porsche, buying them back from Porsche and then returning them to Porsche.
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Brilliance, pure brilliance.
 
Evangelion said:
You can bet that Porsche will make metric assload of money in doing that. They will be laughing all the way to the bank. Hell, for few days VW was the most valuable company in the world, surpassing Exxon-Mobil.
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Other numbers that I read: Volkswagen was about 30% of all German publicly traded companies, and its valuation was higher than all other car manufacturers together 😀
 
John Jacob said:
If there are less shares available than the traders need to close their positions, then obviously some of them won't be able to close their positions, no matter what price they are willing to pay. So what happens to the traders when they can't close their positions? Do they get sent to prison?
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They can close their positions eventually. Let's say someone has borrowed 10,000 shares and sold them. He can buy say 1000 shares at a high price, return them to the lender, who has then 1000 shares. Then he can buy those 1000 shares at a higher price and return them to the lender. Repeat eight more times, each time at a higher price. 😀
 
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