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I remember watching this live as it happened, it was fantastic. Reporting requirements of regulated exchanges should make scenarios like these impossible, but P

I remember watching this live as it happened, it was fantastic. Reporting requirements of regulated exchanges should make scenarios like these impossible, but Porsche found a loop hole and squeezed the shorts. Relevant section: With 12 per cent of the shares outstanding sold short, it was mathematically impossible for every short-seller to buy a share, and therefore close their position. In other words, half the room were going to be left in a burning building with no way out. A panicked dash for the exit began. Edit: for context, I was working for a bank at the time, and implemented the procedure that monitored holdings for the limits above/which reporting requirements would be triggered. The rules are quite extensive, and it was an incredible feat to gain control over such a large share of VW stock without violating any of the actual rules.

ralfd 7y ago
Why was Porsche in trouble after that because of a meager 15 billion debt? Couldn't they just sell VW stock for a fortune after it rallied high?
- sek 7y ago
  They had all the control and wanted to keep it. VW had a lot of cash but they couldn't just take it because 20% of it belonged to Lower Saxony and probably tax reasons. So they gave a loan with better conditions to Porsche from VW. It was not really a bailout, it was more of a restructuring.
hermitdev 7y ago
Eh, there are ways around the lack of shares being publicly available to cover the short. Stock loan agreements and triparty agreements are two ways. Granted, this is OTC and you have to have willing participants, but it is possible. I used to work in back office IT for a hedge fund and had to manually set these up in our systems all the time. Currently work for a Mutual Fund. Dont think current employer engages in this.
- mannykannot 7y ago
  Stock loans from whom, in this particular case? Not Porsche, I would guess. If you can't find a counterparty, that's a red flag?

ralfd 7y ago

Why was Porsche in trouble after that because of a meager 15 billion debt? Couldn't they just sell VW stock for a fortune after it rallied high?

sek 7y ago
They had all the control and wanted to keep it. VW had a lot of cash but they couldn't just take it because 20% of it belonged to Lower Saxony and probably tax reasons. So they gave a loan with better conditions to Porsche from VW. It was not really a bailout, it was more of a restructuring.

hermitdev 7y ago

Eh, there are ways around the lack of shares being publicly available to cover the short. Stock loan agreements and triparty agreements are two ways. Granted, this is OTC and you have to have willing participants, but it is possible. I used to work in back office IT for a hedge fund and had to manually set these up in our systems all the time. Currently work for a Mutual Fund. Dont think current employer engages in this.

mannykannot 7y ago
Stock loans from whom, in this particular case? Not Porsche, I would guess. If you can't find a counterparty, that's a red flag?