VW shares double today

TornadoRed

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Porsche owns 40% and has options on 34%... so only needs 1% more to gain "dominance". This is a typical short squeeze... except the shorts forgot that the state of Saxony owns 20%, leaving a "free float" of only 6% of the total shares. It's a risky game they played, and now they've lost.

The big issues seem to be, will Porsche have the same collegial relationship with the labor unions? And what will Porsche do with Audi?
 

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TornadoRed said:
The big issues seem to be, will Porsche have the same collegial relationship with the labor unions? And what will Porsche do with Audi?
one big happy family? i would hope
 

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With more oil burners :)...since we are on the subject of hoping...
 

vwtom

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VW has the highest market cap of any company in the world. It surpassed Exxon-Mobile this morning.
 

TornadoRed

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Volkswagen AG shares (symbol VOW.XE on the Frankfurt exchange) opened at €500/share this morning, then rallied to €1005 before falling back to €675 -- up €156 from Monday's close. This was the quote at 1130 GMT, so not at the end of the trading day.

According to Dow Jones, VAG was for a brief time the largest capitalization company in the world, surpassing Exxon-Mobil.

Porsche owns 42.6% and has options for 31.5%, for a total of 74.1% of all VAG shares. Lower Saxony holds 20.1%, leaving a "float" of 5.8%. It is not clear how many shares were shorted, but those folks have to be pretty desperate to get out of their trades -- theoretically there is no upper limit on how much they might have to pay. But Porsche isn't going to sell them any shares, nor is Lower Saxony. (Though perhaps Lower Saxony ought to sell a few shares and cut taxes for its citizens. Those shares it owns aren't enough to give it leverage to block Porsche.)
 

TornadoRed

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Now at €800, up 54% from yesterday. VAG is singlehandedly driving up the DAX stock market index.
 

aja8888

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At least there is some good news in somebody's stock market (except for the VW shorts!). Now onto GM and Ford.

Tracinda Corp. (Kerkorian,et al) sold another 26.4 million Ford shares this morning. Hey, what's a few more $100 millions in losses to a 91 year old billionaire? T. Boone Pickens is down $2 Billion in his portfolio since oil fell.

The GM/Chrysler thing is going to get interesting.....this may be GM's chance to *close it up* and get rid of the legacy liabilities and high current costs. May take a few years, though.
 

Zlartibartfast

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aja8888 said:
At least there is some good news in somebody's stock market (except for the VW shorts!). Now onto GM and Ford.
...

The GM/Chrysler thing is going to get interesting.....this may be GM's chance to *close it up* and get rid of the legacy liabilities and high current costs. May take a few years, though.
That's one way to put it -
Report: GM, Chrysler want $10B in federal aid
 

aja8888

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Zlartibartfast said:
Besides going to the *new $$ well* (the Fed is becoming an owner of sorts), my point was related to one (or more) possible outcome of the possible merger, which was aimed at reducing long term liabilities through the formation of a new company (or even the future sale/shutdown of product lines). Not out of the picture here is a bankruptcy proceeding if the new venture does not fare well enough to stay afloat. Bankruptcy/reorganization will clear out a lot of financial clutter on the balance sheet...:)

Quite a difference from the VW/Porsche engagement.
 

TornadoRed

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VAG closed at €945 Tuesday, up €425 on the day.

There is nothing to prevent the price from doubling or quadrupling in the next few days. Hedge funds that went short on VAG shares have losses, either realized or on paper, of over $30 billion.

What is interesting is that Porsche shares haven't been that strong, and it's not that big a company. Porsche's market cap is around $9 billion, while VAG is now more than 20 times larger. Note that Porsche borrowed money to buy VAG shares, so it's not exactly clear how it can acquire VAG or merge the two companies. Or at least not clear to me -- I'm sure the Porsche family has a plan.
 

aja8888

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On a related note, Goldman Sachs and Morgan Stanley have taken a slight hit today because of a rumor that they are *involved* with VOWG.DE (VAG) stock on the short side. But Morgan says *NOT* and Goldman declines to comment.

Boy these markets are tough...:(
 

TornadoRed

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this is choice

From AutoNews
http://www.autonews.com/apps/pbcs.dll/article?AID=/20081028/ANE02/810289997/1193/emaildailyANE04

"Porsche said on Sunday it held stock and options equivalent to 74 percent of Europe's biggest carmaker and aimed to push through a domination agreement next year that would give it management control and capture VW's mighty cash flows.

This will almost certainly meet objections from VW's home state of Lower Saxony, which controls just over 20 percent. In return for losing their dividend, minority investors would get an annual cash payout set by Porsche.

Porsche controls 31.5 percent of VW stock via cash-settled options and its counterparties are likely holding shares as insurance against price spikes. This means investors who sold borrowed VW shares in hope of buying them back at lower prices are scrambling to find the few remaining shares on the market.

Sanford Bernstein analyst Max Warburton questioned Porsche's motives in announcing its holding, and suggested the company may have wanted to cash in one last big jackpot at the expense of unsuspecting investors.

"To have shorted the stock, hedge funds must have inadvertently borrowed stock from Porsche," he told clients, citing the less than 6 percent of the shares in free float.

Warburton believes VW's daily trading volume consisted of speculators unknowingly selling these shares back to Porsche or its counterparties, running headlong into a trap.


Estimating the amount of short positions left to be closed at more than 15 percent of VW's total voting stock, Porsche and its banks could now "name their price.""



hehehe... it looks like Porsche will use the money they've scammed from the hedge funds and investment banks to pay for the VAG shares.
 

TornadoRed

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A little update, from Auto News:
http://www.autonews.com/apps/pbcs.dll/article?AID=/20081029/ANE02/810299995/1193/emaildailyANE04

(VAG common shares currently trading at 517 Euros, down 428 Euros, on the Frankfort exchange)

Shares in carmaker Volkswagen nearly halved on Wednesday after main shareholder Porsche took steps to ease a squeeze on shortsellers that more than quadrupled the stock in days.

On Sunday Porsche said it had indirect control of 74.1 percent of VW, leaving less than 6 percent in the market and prompting a shortcovering rush that vaulted VW's market value to 278 billion euros ($348 billion) and its shares to a record close of 945 euros on Tuesday, compared with its weekend close at 210.85 euros.

The stock fell as low as 491 euros in early Frankfurt trading on Wednesday, pulling Germany's blue-chip DAX index GDAXI down 2.2 percent, despite-double digit percentage gains on other stocks after Wall Street's second best gain on record.

"In order to avoid further market distortions and the resulting consequences for those involved, Porsche SE intends -- depending on the state of the market -- to settle hedging transactions in the amount of up to 5 percent of the Volkswagen ordinary shares," Porsche said in a statement.
"This may result in an increase in the liquidity of the Volkswagen ordinary shares," it added.

(snip)
Shortsellers who rushed to close their positions after Porsche's announcement on Sunday were paying virtually any price to get their hands on the few remaining shares, even though Porsche insisted its announcement would allow short sellers to unwind their positions "without haste and without greater risk".
(end of quote)

No one is going to admit a thing, but I think Porsche gave the short-sellers an ultimatum: fork over 500 Euros a share, or take a chance that the price could climb back above 1000 Euros or even higher.

Porsche shares were up 41% today. No wonder, they just made a huge profit skinning some hedge funds.

I love stories like this, they give me such a feeling of schadenfreude. :cool:
 

aja8888

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Looks like Porsche is in the *Driver's Seat* and will get to 75% ownership next year (plus extorting cash out of the hedge funds along the way).:D
 

aja8888

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VW is much larger in terms of sales. Almost #1 in the auto world (revenue) from what I read. So it would be a little fish swallowing a much larger one.
 

TornadoRed

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What makes this even more remarkable is the timing. It's not just Porsche, it's Porsche plus its bankers. Porsche must have some great bankers, because everywhere else in the world bankers are reluctant to lend for almost any reason.

I like what Porsche said: "This may result in an increase in the liquidity of the Volkswagen ordinary shares". In plain English: we will sell you some shares, we will let you out of your trade, but it will cost you a lot and then we'll buy them back later for a lot less. And the subtext: don't try this again, if you know what's good for you.

I hope that VW under Porsche ownership/management is as nimble in bringing products to market as it is in its financial affairs.
 

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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.
 

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Billionaire Merckle commits suicide
By James Wilson in Frankfurt and Andrew Jack in London

Published: January 6 2009 15:26 | Last updated: January 6 2009 19:10

Adolf Merckle, one of Germany’s wealthiest men, committed suicide after weeks of talks with creditors designed to save his businesses from being consumed by disastrous investments and the global financial crisis.

The billionaire, 74, was said by his family to have been “broken” by the sight of his business empire, which ranged from pharmaceuticals to cement, crumbling. He died on Monday evening, apparently hit by a train a few hundred metres from his home in southern Germany.

A statement from his family said he had taken his own life. “The desperate situation of his companies caused by the financial crisis, the uncertainties of the last few weeks and his powerlessness to act, have broken the passionate family entrepreneur.”

The publicity-shy billionaire was one of Germany’s most powerful industrialists having built his family’s small pharmaceutical business into a 120-firm conglomerate employing 100,000 people. He was regarded as a modest man who was known to bicycle to work.

His personal worth was estimated at more than $9bn by Forbes magazine, while his companies’ combined turnover was €30bn ($40bn), and he was described as Germany’s fifth richest man.

His fortunes worsened dramatically last year after he was caught on the wrong side of trades in Volkswagen shares, whose price spiked when Porsche revealed it controlled more of VW than had been thought. Merckle had borrowed VW shares to sell them short in expectation of their price falling, while other trades also went against him."
 

TornadoRed

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aja8888 said:
Stepped in front of a train, eh? I wonder if he had any of his portfolio with Bernie Madoff? :D
Maybe Bernie Madoff went short on VAG shares.

If at one point the number of shares shorted was as much as 13% of the total, and the market cap that day was $180 billion, then about $23 billion was at risk. Total losses by short-sellers might not have been that much, but who knows? Maybe some got out of those bad trades as prices climbed, but others jumped in to take advantage of an apparent opportunity.
 
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