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Porsche: The Hedge Fund That Also Made Cars
- immaceleb 12y agois that true?
- omnibrain 12y agoI followed the story at the time in the news and in reports. This story reports the matter, by and large, as I remember it.
- scott_karana 12y agoThey have numerous in-line citations from contemporary, independent news sources: plenty of information to determine the truth yourself. :)
- CamperBob2 12y agoIt's true, but it's also true that the Piëch and Porsche families have always been like the two guys duking it out over the island in LOST. This particular "business relationship" goes back multiple generations. The good news for owners and fans of the cars is that Porsche's doing their best work ever under the Volkswagen AG umbrella.
- MrBuddyCasino 12y agoI know nothing about cars, but I heard from someone who worked there that for some parts, they now have to send half of them back to Volkswagen because they don't meet specifications anymore, and that bureaucracy is on the rise. Just hearsay, so take this with a grain of salt.
- CamperBob2 12y agoI know nothing about cars, but I heard from someone who worked there that for some parts, they now have to send half of them back to Volkswagen because they don't meet specifications anymore This is a good thing. In 1992, it was my job, as a Porsche customer, to find all of those bad parts. :-P These days the factory does a better job catching the problems before they escape the building.
- jakozaur 12y agoThe story of one of the largest short squeeze: http://en.wikipedia.org/wiki/Short_squeeze http://en.wikipedia.org/wiki/Short_squeeze
- tim333 12y agoProbably the largest ever in nominal dollars. If you adjust for inflation there might be some historical stuff that would beat it I guess?
- tim333 12y agoI note a couple of down votes but the market cap increased by approx $300bn in a couple of days to $370bn. Anyone know any short squeezes that beat that?
- oxryly1 12y agoSeriously... that is the buried lede here: VW's widely shorted stock goes from $200 to $1000 over 2 days after the financial crash was already under way. A terrible time to be part of the bear herd.
- bedhead 12y agoI know a guy who was personally bankrupted by this trade. Got bought in at the top. It was sad.
- datainplace 12y agoPriceonomics. The blog that also is a startup. Sorry, I couldn't resist.
- rohin 12y agoDon't feel bad about the joke, that's how we think of ourselves too (I work at Priceonomics). I think it's actually an interesting advantage versus a content site that just thinks of themselves as a content site.
- datainplace 12y agoI miss the old price guides, but I enjoy the blog (it's in my RSS feed). I may even buy the book one day. For those of you who missed the story of Priceonomics' pivot, Techcrunch has a good writeup: http://techcrunch.com/2013/11/26/priceonomics-data-services/ http://techcrunch.com/2013/11/26/priceonomics-data-services/
- rokhayakebe 12y agoBy the way, blogging as a startup is one of the most difficult products to build. Seriously, imagine a product with users expecting new features weekly, daily, or sometimes hourly.
- lisper 12y agoBerkshire-Hathaway was a textile company (and then an insurance company) before it became an investment company. http://en.wikipedia.org/wiki/Berkshire_Hathaway http://en.wikipedia.org/wiki/Berkshire_Hathaway "In 1962, Warren Buffett began buying stock in Berkshire Hathaway after noticing a pattern in the price direction of its stock whenever the company closed a mill. Eventually, Buffett acknowledged that the textile business was waning and the company's financial situation was not going to improve. In 1964, Stanton made an oral tender offer of $11-1⁄2 per share for the company to buy back Buffett's shares. Buffett agreed to the deal. A few weeks later, Warren Buffett received the tender offer in writing, but the tender offer was for only $11-3⁄8. Buffett later admitted that this lower, undercutting offer made him angry.[7] Instead of selling at the slightly lower price, Buffett decided to buy more of the stock to take control of the company and fire Stanton (which he did). However, this put Buffett in a situation where he was now majority owner of a textile business that was failing."
- soperj 12y agoYeah, but Buffett was a investor from the beginning, not a textile manager, he just used the company to keep doing what he was doing. He also calls it his worst purchase ever.
- mandeepj 12y agoAny idea why Buffett calls Berkshire as his worst purchase ever? I think it will be interesting to read
- smeyer 12y agoThe quoted wikipedia article gives a decent general idea. Basically, he did it in part based on personal slight, and lost a lot of potential gains he could have had if he'd put it towards the insurance purchases he was making with a lot of the rest of his money at the time.
- jakarta 12y agoBerkshire fundamentally was not a good business, he invested in a textile firm right around the time the North American textile industry started to face really heightened global competition. If I recall correctly, in '64 Buffett took control and tried to keep the thing going and had the mill invest some of its cash flow into the business, but all those investments ended up worthless as the mill eventually had to shutter. He could have deployed the capital elsewhere and earned positive returns. Eventually (circa '67)he realized it was a lost cause and stopped investing in the mill, instead he used its cash flow to go out and invest in other companies (insurance, etc) which remain there to this day.
- srhngpr 12y agoThey should make a movie out of this. "Das Hedge Fund"
- cjbenedikt 12y ago"DER" Hedge Fund...;-)
- deleted 12y ago[deleted]
- pd0wm 12y agoThe slogan of Volkswagen is "Das Auto". Or did you knew ;)
- wolfgke 12y ago"Das Auto" is correct German, but neither "Das Hedge Fund" nor "Der Hedge Fund" is. Only "Der Hedgefond" is correct.
- peterfirefly 12y agoBessermacher.
- switch007 12y agoDer die das die, den die das die, dem der- aargghhh! Sorry, had flash backs of my high school German classes
- raverbashing 12y agoDer Hedgefond http://de.wikipedia.org/wiki/Hedgefonds http://de.wikipedia.org/wiki/Hedgefonds
- ManuelKiessling 12y agoSeems like the article actually is an experiment that tries to find out in how many ways you can misspell the word Porsche.
- deleted 12y ago[deleted]
- swang 12y agoWow I remember the squeeze, didn't know it cost Porsche it's independence. Great read!
- burnte 12y agoIt's a very dangerous gambit, because the more you buy, the more power you give to the company you're buying, because so much of your wealth is tied up in them, their actions directly affect your wealth without you having any control. It's the same reason the argument that China could crush the US economically by calling in its debt is so wrong. That would deflate the dollar to such a point that China would lose literally a trillion dollars of value. Porche simply forgot how much power they had given away.
- wdewind 12y agoIt's an interesting story but hard to understand why they are saying it's a hedge fund. The fact that Porsche made an investment in VW that affected the larger financial markets does in no way equate to Porsche being a hedge fund, especially since that investment was made to allow them to continue manufacturing cars, not as a switch to focusing on financial markets.
- iaw 12y ago1) Porsche's investment did not impact the larger financial markets in any way. Porsche's investment impacted VW stock and nothing else (I believe Porsche was 100% privately owned at that time) 2) Porsche's actions were like a hedge fund because they designed a financial situation where they couldn't lose (up until the financial collapse cut off their liquidity). Had the markets not collapsed and Porsche had been able to borrow like it could in 2007 they would've owned VW, the issue is that the markets collapsed and massive lending restrictions were imposed requiring Porsche to payback loans instead of roll them over. In the end they turned to VW to pay back the loan. Had that external event not impacted the lending environment Porsche would've acquired VW and subsidized their cost through financial participants shorting VW stock.
- caboteria 12y agoI've heard Harvard described as a hedge fund that has figured out a great way to avoid taxes.
- jessaustin 12y agoThey're not quite on a level with the Catholic Church, but give them a few centuries...
- CamperBob2 12y agoOf course, Ikea could school them both when it comes to tax dodges.
- deleted 12y ago[deleted]
- Argorak 12y agoI am constantly amazed on how well IKEA stays out of the spotlight as a corporate entity. We complain about Apple and Google, while IKEA is playing at least in the same league.
- tinco 12y agoBut IKEA is not originally a US company, if anything it's avoiding Swedish taxes.
- deleted 12y ago[deleted]
- Zhenya 12y agoNot the best phrase choice.
- guiomie 12y agoQuite a good read.
- nathell 12y agoDid anyone mention McDonald's, the real estate company that also happens to be making hamburgers, yet? http://money.howstuffworks.com/mcdonalds.htm http://money.howstuffworks.com/mcdonalds.htm
- raverbashing 12y agoThey also make money on the pig price oscillations.
- adwf 12y agoI think they are putting a little too much of the blame on Wiedeking here. The CEO doesn't make huge stock purchases like this without board approval, and Piëch was on the board of both Porsche and VW. To me it sounds a lot more like a play by Piëch all along. The article also understates the rivalry between Porsche and VW. They're saying it's just Wiedeking behind it since '93, but it's really been going on for a lot longer as far as I know.
- wolfgke 12y agoGerman newspapers at the time mainly blamed Holger Härter as the "mastermind" behind the sketchy stock gamblings of Porsche.
- arjunrc 12y agoThis is a must-read for automobile fans. Ferdinand Piech is as tech and business savvy as he is diabolical, and this article gives you a little perspective of that. I hope someone writes a book about him soon. I mean, if you personally played a hand in creating the Audi Quattro (that dominated rallying) and the world's fastest car (Veyron, reviving a dead brand), which everyone deemed impossible, you've got to be in the history books of the automobile world. Can't wait to see how they compete with electric upstarts and how they evolve their Ducati motorcycle brand.
- insaneirish 12y ago> Can't wait to see how they compete with electric upstarts I have great hopes for their engineering to continue to be excellent. Audi has continued to push the envelope in Le Mans, first with diesel and now with hybrids. They've always done a good job of trickling down race technology to consumer vehicles. (One of my fondest driving memories is driving home in 6 or so inches of snow with pickup trucks and SUVs sliding all around me all while my tiny sedan with quattro didn't slip a wheel applying power once.)
- ExpiredLink 12y ago> I hope someone writes a book about him soon. Mostly in German: http://www.amazon.com/s/ref=nb_sb_noss?field-keywords=Ferdinand+Pi%C3%ABch http://www.amazon.com/s/ref=nb_sb_noss?field-keywords=Ferdin...
- arjunrc 12y agoThank you for the link. I found one English one, which dedicates part of it about him. http://www.amazon.com/Six-Built-Modern-Auto-Industry/dp/B005Q5Y3SE http://www.amazon.com/Six-Built-Modern-Auto-Industry/dp/B005... I do wish for a proper English biography, written by someone like Steven Levy or Walter Isaacson.
- wuschel 12y ago(By sheer coincidence,) I sat next to Mr. Piech in the same Bentley in Paris this year. We had a short conversation, and it took some time before I realized who he was. An old man - with a truly sharp mind. The shadow king of VW.
- oxryly1 12y agoExcellent article. In depth, with great sources. And all on one page!
- seanv 12y agoanyone who took a quick look at this and didn't read the whole thing, i highly recommend it... i felt like i was reading Game of Thrones - Car Edition. What a fantastic story I never knew about!
- hosay123 12y agoBlatant clone of a vastly more concisely written (read: not padded using a thesaurus) article by Ivan Krstic https://radian.org/notebook/porsche https://radian.org/notebook/porsche
- abat 12y agoThe Krstic article is an explanation of the short squeeze that happened near the end. This is just a small part of the Priceonomics article. The Priceonomics article includes a lot more history about the companies and people involved as well as the German politics protecting VW. The Krstic article doesn't even include the twist ending where VW buys Porsche.
- cumeater 12y agoI like how desperately this article tries to portray Ferdinand Piëch as a genius when he just got lucky. What if the "great Financial Crisis" of 2008 did not hit and a board member wasn't in bed with German Chancellor? These shenanigans would have blown into Piëch's face.
- nicholassmith 12y agoPorsche also required the VW Rule to be repealed, irregardless of the financial collapse that would have been a sticking point and could have dragged on indefinitely or not happened at all. Porsche would have the 75% it wanted but they couldn't have taken a full acquisition, and Piëch could play the game from that position.
- ot 12y agoIt seems that this move has been performed enough times to deserve its own (very amusing) name: Pac-Man defense http://en.wikipedia.org/wiki/Pac-Man_defense http://en.wikipedia.org/wiki/Pac-Man_defense
- pjtr 12y agoI'm curious, how much did Wiedeking personally profit from this scheme? How much would he have made had he continued "just focusing on making cars" as the article concludes he should have?
- pranayairan 12y agosuch an amazing post. Loved it !!