VW shares up 54 % on Porsche move

[JamesJ]

Quote from AMT4SWA:

VW stock should be high......the new Passat CC VR6 with 4Motion is very nice......wifey wants one (getting rid of her Lexus GS).

http://www.youtube.com/watch?v=n8b0Rqr8UI4


Anyone shorting the DAX as a fade move.....been taking some shots myself. 4700 and above has been working out so far....a probe higher would be nice to take a shot with bigger size.

this makes no sense...

case 1: VOW dropped out of DAX (which looks likely) or at least weights readjusted.
-> money flows out of vow into other shares -> dax up

case 2: VOW stays as is in there:
risk squeeze goes on. -> dax up.

keep in mind, that value of dax before adjustment = value after adjustment

and if the overvalued VOW looses weight or drops out - DAX is still up there.

so you are better off shorting VOW (which is imho not a good idea though)

 

[AMT4SWA]

Quote from JamesJ:

this makes no sense...

case 1: VOW dropped out of DAX (which looks likely) or at least weights readjusted.
-> money flows out of vow into other shares -> dax up

case 2: VOW stays as is in there:
risk squeeze goes on. -> dax up.

so you are better off shorting VOW (which is imho not a good idea though)

I was thinking more along the lines of collateral damage once this whole mess blows up....we will see.

Thanks for the great suggestion though!!!

 

[JamesJ]

Quote from AMT4SWA:

I was thinking more along the lines of collateral damage once this whole mess blows up....we will see.

Thanks for the great suggestion though!!!

for this play the best is probably to be short Deutsche Bank and other sellers of options on VOW.
DB is falling hard already

 

[AMT4SWA]

Quote from JamesJ:

for this play the best is probably to be short Deutsche Bank and other sellers of options on VOW.
DB is falling hard already

Correct....I see that. I love to watch market situations like this play out....this is just too fun imo (almost as good as watching "24".....LOL!).

Popcorn at my side!

 

[hektor]

Quote from jeb9999:

Porsche owns 42.6% of VW stock and has options for 31.5% giving a total of 74.1%. Lower Saxony owns 20% of VW, so only 5.9% of VW is left for everyone else.

5.9% of VW is the only difference between a short squeeze and a corner.

Does somebody know which bank was the buyer of the options for Porsche or cleared them?

 

[Cutten]

Both Porsche and the state investor should now be open to multi-billion lawsuits for not selling their stake at the elevated prices. When you are long a stock in a short squeeze, you must sell because once it's over you will never see close to those prices again.

 

[Cutten]

Quote from m22au:


One of the many crazy things about this silly situation is that Porsche's 30% stake in VW has risen by over 50 billion Euros since last Friday, yet the market cap for Porsche has only gone up by <1 billion EUR.

Why is this crazy? The moment Porsche or Saxony starts to sell their stake (if they do so), the price will collapse back to something around fair value, therefore they cannot sell their stake at anything remotely close to current prices. If this sale does not happen, then there are few sellers and many forced buyers (shorts) and thus current prices make sense based on forced liquidation.

You are confusing the current price (set by supply & demand on the margin) with the price for a large stake (set by supply & demand for the average price of the entire 75% stake). The two are completely different things.

 

[Cutten]

Quote from m22au:

I agree that Porsche does not have to go up, however as I mentioned previously, the company's stake in VW has increased in "value" by more than 50 billion EUR since last Friday.

No it hasn't. The value of their stake is what they are able to sell it for, oand clearly they are not able to sell it for anything close to the current share price. You are confusing the value of the stake with the current share price - two different things.

 

[Cutten]

Quote from m22au:

update:

People catching on to the arb situation a little bit.

There is no arb, because the short leg has a squeeze on and so there is no way you can guarantee you will be able to maintain the borrow, and no way you can guarantee a maximum price how high the stock can go. Long positions in Porsche are not fungible with Porsche's stake in VW, therefore you cannot deliver and thus the arb is not arbitrageable. It is exactly the same as being short some physical commodity, and then a storm or some other force majeure prevents delivery. Your short obliges you to deliver, and you cannot meet delivery by being long something else (e.g. long oil in the Middle East if you need to deliver in the USA; or long Porsche shares when you need to deliver VW).

Going long Porsche and short VW is virtually the same as going naked short VW, it is not an "arb" in any sense of the word.

N.B. I agree with earlier posters that this reflects badly on the exchange. Porsche could well be open to market manipulation charges simply on their announcement. At the very least, trading in the stock should be suspended and the shorts should be settled by tender offer/auction from current investors. In the old days of the NYSE and other exchanges, the exchange would suspend trading in genuine corners, then fine the cornerer more than their net profit and force liquidation.

 

[local_crusher]

This one can take any direction. From going nowhere to creating a monumental crash in Germany (DB; Banks).

The only thing I'm sure about is it will occupy the highest German + EU courts for years.

"Regulators" have failed 100%.

We should visit the next zoo to see if we can find some animals who can handle the job in a better way. Maybe he is sufficient: