Posted on 10/28/2008 9:01:36 AM PDT by TigerLikesRooster
VW becomes world's biggest company as short sellers' panic drives shares
Volkswagen briefly overtook Exxon as the world's biggest company by market value as panic buying by short sellers to cover positions drove the shares up 93pc.
By Roland Gribben
Last Updated: 2:16PM GMT 28 Oct 2008
Volkswagen briefly overtook Exxon as the world's biggest company by market value after its shares hit 1,005 euros as short sellers closed positions. Photo: Reuters Europe's largest vehicle manufacturer was valued at €296bn (£236bn), against $359bn (£227bn) for Exxon, after its shares hit €1,005 in early trading in an ongoing reaction to details from Porsche on how it planned to take over the company.
The shares later fell back to €645.58 in midday trading but still showed a gain of 24pc.
One trader likened it to musical chairs saying: "There are too few chairs for the players."
Porsche triggered the stampede yesterday after announcing it controlled just over 74pc of VW shares through a 42.6pc direct equity stake and options on another 31.5pc.
The Dax index of leading shares was up by 9.83pc at 4,760.52 points in early trading in Frankfurt today but most of the other issues were in negative territory.
Short sellers galloped into the market snapping up VW stock to cement their speculative positions after Porsche announcement. Short sellers sell share they do not own in a company in the hope that they will be able to buy them back more cheaply at a later date.
Yesterday's buying raised the value of VW voting stock alone to a staggering €188bn (£150bn) and making the German group worth more than the entire European motor industry. The shares closed up almost 150pc at a new peak of €520 while Porsche shares slammed into reverse, tumbling 9pc.
(Excerpt) Read more at telegraph.co.uk ...
I love it when short sellers take it in the shorts..
Ping!
More hedge funds will explode and burn with this...:-)
I pray Soros was shorting them.
Good comment - we can hope!
Why?
GS rumored to be short and is doing the circle of fire thing today.
I don't get out much - what does "circle of fire thing" mean...
When you short a stock, you effectively borrow stock from someone else and sell it -- with the hope that you can eventually buy that stock at a lower price and pocket the difference.
However, if the price rises significantly after you have shorted the stock, it can trigger a margin call. You either have to come up with more money, or buy the stock at a higher price to close out the position.
If a lot of people have shorted a particular stock, a sudden jump in the price creates an artificial high demand, for a brief period. Short sellers scramble to buy the same limited number of available shares, and it pushes up the price. It's known as a "squeeze", because as the stock continues to rise, more short sellers get margin calls, and the cycle feeds on itself.
most frustrating thing is as far as I can tell there is no ADR to speak of in the US to do anything with this amazing price distortion.
Ticker VLKAY, volume so far today is about 200k shares.
I’d be careful tho’...
thanks, i actually pulled that up with 3 other pinkies under the vw name, but volume was even lower then. i guess they don’t want to list on a us exchange and just have pinksheet adrs...
That's the US ticker for the American Depository Receipt (ADR). VW trades in Germany mainly.
All five letter tickers that end in "Y" are foreign, and not Canadian. Canadian stocks that aren't fully listed in the US have a five letter ticker ending in "F". Mutual Funds have an "X" at the end...
Yes, he was asking for an ADR...
Both sides are speculating and attempting to manipulate the market. The only question is who gets to set the price at settlement.
A temporary fluke, but nonetheless pretty amazing that this is a company whose only assets were a pile of rubble 63 years ago. Most amazingly, VW was put back in business by the British, who needed cars for their occupation forces in their zone of Germany.
“IMO - Short sellers are scum sucking bottom feeders that make money off the misery off legit investors and add no value to the business or society - but that’s just my opinion.”
There is a difference between LEGITIMATE short selling, which actually provides liquidity to the market, and “naked” shorting, which is perfidious. When you legitimately short, you borrow a share from your broker, sell it into the market, and hope to buy it back lower. Nothing wrong with this, you are buying lo and selling hi, just in reverse order.
The immoral part of shorting comes when the SEC lets Market Makers and brokers “naked” short, by never having to track down the original share to sell short in the first place. They just “make it up” and sell it. They are supposed to account for the shares they sell short within 48 hours (I think that is the timeframe) but no one pays any attention to it at all. The SEC has busted many brokerages just shorting the hell out of stocks with company funds, with no shares being called. Etrade in a rather famous admission regarding their short position in GLKC, when audited by the SEC and asked where they came up with the shares to short, simply said “we are hopelessly short.” The evil thing about this is that they were not even seriously fined.
Brokers, hedge funds, market makers, banks, all kinds of big financial operators simply “sell” stuff they don’t have. This is equivalent to counterfeiting stock and the people who do it should go to jail.
Again, it is our “conservative” president who is in charge of the Treasury, which has oversight over the SEC, the most worthless, corrupt organization outside of the US Congress I have ever seen.
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