Stock Trading System

  • Subscribe to our RSS feed.
  • Twitter
  • StumbleUpon
  • Reddit
  • Facebook
  • Digg

Wednesday, 29 October 2008

Volkswagen World's Biggest Company - Fallout for Goldman Sachs and German Banks?

Posted on 11:35 by Unknown
Yesterday, after its stock climbed 250% on Monday and 93% on Tuesday, Volkswagen passed Exxon to become the largest company in the world (by market capitalization).

Volkswagen is now more valuable than Toyota, Honda, Nissan, Daimler, Renault, Peugeot, General Motors, and Ford combined!

Why did this happen?  It's a massive short squeeze.

It turns out that a lot of people shorted Volkswagen stock.  When someone shorts a stock, they sell shares that are borrowed from others.  The key is that, eventually, the party doing the shorting has to return the stock by buying it back.

Porsche is trying to acquire Volkswagen, and they owned 35% of the stock.  The government of the Lower State of Saxony owns 20% of the stock, and are trying to block Porsche's takeover.

Porsche figured out that there were a lot more short positions on VW then expected, and they decided to capitalize on it. If they can't get Volkswagen, they can at least get rich.

Taking advantage of lax German disclosure laws (that are to be strengthened next year),  Porsche secretly bought more stock. 

In addition, they bought call options on WV from Goldman Sachs and German banks (such as Commerzbank).  The banks thus have short call option positions in WV - and would need to buy the stock to cover rising prices.

Over the weekend, Porsche dropped a bombshell by announcing that, not only had they increased their stake in VW from 35% to 42.6%, but they had options to buy another 31.5%.

This means that Porsche controls (directly or indirectly) just over 74% of VW stock.  Since the Lower State of Saxony owns 20%, this leaves less than 5% of VW stock that short sellers and the option sellers (Goldman, etc) can buy to cover their positions.

The shorts and banks are basically screwed, and have to bid up prices higher, while Porsche exercises the options and locks in prices.

Email ThisBlogThis!Share to XShare to Facebook
Posted in Business | No comments
Newer Post Older Post Home

0 comments:

Post a Comment

Subscribe to: Post Comments (Atom)

Popular Posts

  • Lichello's AIM System
     I previously mentioned how my trading system is build around constant value investing.  Another system that is based on this technique is ...
  • The Stock Trading Riches Message Board on iHub
    I've created a new message board on iHub to discuss and answer questions about my book, the Stock Trading Riches system, trading and in...
  • The Preacher
    A deacon is in the hospital and his good friend, a preacher, goes to visit him. The preacher notices all the medical equipment attached to...
  • TWTR
    The Twitter IPO price was $26, but it opened at $45.10, traded as high as $50.09, and closed at $44.90. If it drops into the $30's, or i...
  • Stock Trading Riches, Lichello AIM, and the Money Spinner
    My Stock Trading Riches system is based on constant value investing, like Robert Lichello's AIM system and "The Money Spinner...
  • Don't Underestimate Small Flows of Passive Income
    Monevator is a motivational blog for armchair investors. It has a good article on Why a little passive income from a side project is worth a...
  • How The Debt Ceiling Debate Could Affect Interest Rates
    At the end of the day, after they make points with their followers, I believe democrats and republicans will compromise and raise the debt c...
  • Praveen in a Video Discussion on The Future of Money: Bitcoin, Economics, The Gold Standard, And Work
    Because of my book, some popular bloggers asked me to join an interview/panel discussion on money and finance. (I came on a few minutes la...
  • Carnival of Money Stories for March 1, 2010
    The latest edition of the Carnival of Money Stories features links to a lot of great blog articles on money and finance. Check it out and e...
  • Two Stock Trading Examples Using My System
    Here are links to two posts where I show the actual buys and sells my system generated for a stock and an exchange traded fund (ETF) that I ...

Categories

  • Billionaires
  • Business
  • celebrities
  • crisis
  • Entrepreneurs
  • FHA
  • Financial Crisis
  • Government
  • Hollywood Bollywood
  • Humor
  • internet marketing
  • Law
  • Marketing
  • Passive Income
  • Personal Finance
  • Personal Growth
  • Politics
  • Real Estate
  • renting
  • Stock Trading
  • Taxes
  • Videos

Blog Archive

  • ►  2013 (13)
    • ►  December (1)
    • ►  November (1)
    • ►  August (1)
    • ►  July (1)
    • ►  June (1)
    • ►  May (1)
    • ►  April (4)
    • ►  March (2)
    • ►  February (1)
  • ►  2012 (33)
    • ►  October (1)
    • ►  September (2)
    • ►  August (2)
    • ►  May (1)
    • ►  April (6)
    • ►  March (9)
    • ►  February (9)
    • ►  January (3)
  • ►  2011 (76)
    • ►  December (6)
    • ►  November (9)
    • ►  October (3)
    • ►  September (4)
    • ►  August (6)
    • ►  July (7)
    • ►  June (6)
    • ►  May (9)
    • ►  April (12)
    • ►  March (5)
    • ►  February (2)
    • ►  January (7)
  • ►  2010 (132)
    • ►  December (15)
    • ►  November (7)
    • ►  October (8)
    • ►  September (14)
    • ►  August (6)
    • ►  July (13)
    • ►  June (19)
    • ►  May (12)
    • ►  April (8)
    • ►  March (12)
    • ►  February (6)
    • ►  January (12)
  • ►  2009 (197)
    • ►  December (11)
    • ►  November (7)
    • ►  October (8)
    • ►  September (4)
    • ►  August (12)
    • ►  July (25)
    • ►  June (28)
    • ►  May (24)
    • ►  April (22)
    • ►  March (21)
    • ►  February (14)
    • ►  January (21)
  • ▼  2008 (49)
    • ►  December (18)
    • ►  November (4)
    • ▼  October (16)
      • Is Porsche the New Goldman Sachs?
      • Volkswagen World's Biggest Company - Fallout for G...
      • Ridiculous, But True, Reasons Employees Missed Work
      • Woman Arrested For "Virtually killing" Her Online ...
      • Social Security Payments Going up 5.8 Percent
      • Your Investment Goals...
      • Taking stock of what’s right with the United States
      • Interesting Article about the Financial Crisis
      • Taking out the DOG...
      • Lazy Way to Success Video
      • The Treasury Department has issued a new one dolla...
      • A Cartoon for the Times...
      • Home Sells For $1.75 on Ebay
      • Kashkari to Lead $700 billion bailout
      • Gas Shortage in the Southern United States
      • Better than a Flu Shot!
    • ►  September (11)
Powered by Blogger.

About Me

Unknown
View my complete profile