Odey Among Losers On VW Share Surge
By William Hutchings
Of FINANCIAL NEWS
U.K.-based Odey Asset Management is among the hedge funds that have made paper losses through holding short positions in German carmaker Volkswagen, whose share price rocketed on news of a massively increased stake by rival Porsche.
This adds one of the U.K.'s longest-standing hedge fund managers, established almost two decades ago, to a list of managers nursing losses over Volkswagen that includes Greenlight Capital, SAC Capital - the world's most expensive hedge fund, with management fees of 5% and performance fees of 50% - Glenview Capital, Marshall Wace, Tiger Asia, Perry Capital and Highside Capital, according to the Wall Street Journal.
The hedge funds held short positions in Volkswagen's shares and made paper losses yesterday when Volkswagen's share price soared 82% after Porsche said that, using derivatives, it had increased its direct and indirect holding in the company to 74%, just below the three-quarters level it needs to take total control of its rival.
Odey European Inc., the hedge fund managed by Odey Asset Management founder
Crispin Odey, said in its most recent quarterly report to investors, relating to the end of September, that it had a short exposure to automotive companies amounting to about 2% of its portfolio. Odey European Inc. had EUR978 million ($1.25 billion) of assets under management at the end of last month.
Odey said in a broadcast to investors on Monday: "One of our shorts which has become quite large is Volkswagen."
He went on to say that Porsche has taken a considerable risk through its move:
"Volkswagen is now valued at 112bn and Porsche... are basically saying they have built up a 74% of the company (i.e., arithmetically, a value of about EUR82 billion)... So Porsche, with EUR4 billion market cap, has about EUR56 billion worth of shares in actual cash and around about another EUR22 billion worth of shares in call options (EUR4 billion + EUR56 billion + EUR22 billion = EUR82 billion).
"So what Porsche have now got to do is get control of Volkswagen in order not to be annihilated because they can't support that acquisition. They can only support it if they got the whole of it but they can't afford the whole of it.
"So you have a very odd situation with Volkswagen, which shows you there is EUR4 billion market cap with EUR75 billion of assets. So anyone who says the world is deleveraging, well, there are parts of it which are undoubtedly leveraging at the same time."
http://online.wsj.com/article/BT-CO-20081029-711511.html?mod=wsjcrmain
Currently the common shares of Volkswagen are trading at 556.00 Euros, up
39.00 from Wednesday's close.