Porsche gave few details of the options, other than to say they would be settled in cash. To rebalance, the funds will have to sell VW and buy the 29 other companies. On Tuesday night the German stock exchange said it would reduce from 27 percent to 10 percent the weighting of VW in the index. Those funds, however, may sell shares Wednesday. Volkswagen is one of the 30 companies in the DAX index, Germany’s most prominent stock index, and index funds own a significant number of shares. Another was to buy into Porsche while betting that Volkswagen shares would fall.Īs of last week, roughly 12.9 percent of Volkswagen shares were lent out, according to Data Explorers, a London-based research firm. One was to exploit the difference in value between two classes of Volkswagen stock. Hedge funds had used several strategies in VW shares. That calmed long-running tensions with the German state of Lower Saxony, which owns a 20.2 percent stake in VW. Porsche, the maker of legendary sports cars like the 911, earlier this year suggested it would stop its purchases when it got near 50 percent.
Its strategy has been to make a creeping takeover of the company, purchasing options or shares in the open market and later announcing its new shareholding level in the company.
#VW STOCK SQUEEZE SERIES#
Porsche has waged a series of bitter legal and political battles over the last three years to gain control of Volkswagen. German regulators are scrutinizing the torrent of panicky trading, but it is not clear if they will act. “When you get into panicked markets as we’ve had in the past few months, you get these vicious moves which happen on the downside and then to the opposite direction. “We’re getting a sense of the sturm und drang in the markets now,” said Michael Holland, the manager of Holland & Company, an investment management firm. The risk soared, and the short sellers were forced to act quickly.