Porsche’s brilliantly conceived wealth transfer
This is the kind of stuff you read about in old Jesse Livermore books. Porcshe played it pretty slick – cornered the market in VW shares, plundered a couple of hedge funds to the tune of billions and billions of dollars, and made Volkswagen the world’s most valuable company for a few days.
At the time Porsche dismissed these musings as a “fairy-tale�. But on October 26th it executed a handbrake turn, saying that it owned nearly 43% of VW’s shares outright and had derivative contracts on nearly 32% more. That meant it had tied up almost all of the freely available shares (the rest are held by the state government and index funds). Hedge funds quickly did the maths, concluding that they could be caught in an “infinite squeeze� in which they were forced to buy shares at any price.
