some speculation out there that GS was on the receiving end here....they came out and denied....maybe some of that bailout cash sabed them<g>....TWT.....anyway....fomenting a short squeeze is illegal here... germany? not so much:
market-ticker.denninger.net!.html
Before you start lecturing people over on this side of the pond regarding transparency and open markets, you might want to take a look in your own back yard.
See, it appears that Volkswagen had a little short squeeze.
Well, maybe not so little.
See, Porsche has held a stake in the company for quite some time to protect a supply of parts that it gets from VW. All fine and good.
But apparently unlike in the United States, there is no requirement that they be transparent with their intentions or timing.
Or, for that matter, to be able to finance what they claim to intend to do.
So when Porsche announced its intention to raise its stake to 75% from 42.6% it set off an insane short squeeze, as the announced intended stake exceeded the firm's float.
This caused VW's stock to rise by eight hundred percent in the space of two days.
Volkswagen has been a favorite short of hedge funds. And why not? Automakers into an economic downturn? An obvious short, right? Car deliveries slowing, automaker profits under pressure. Looks obvious to me, and did to them too.
The body count of hedgies being carried out on their shields should be most impressive over the next few days.
Two problems are immediately apparent with Porsche's announcement and give rise to questions about whether this was an intentionally-engineered event and not a legitimate business transaction:
* Their "stake" Porsche claims to intend to accumulate appears to exceed both their market cap and any ability to finance the transaction, especially in today's environment.
* There are cash-settled option positions outstanding which are not required to be disclosed under German law.
Transparent markets eh? Hmmmm....
Looks to me like someone decided to manufacture a short squeeze, which by the way, is illegal in the United States. Of course without full transparency its rather difficult to know exactly what was really going on, isn't it?
I have no idea if this was an intentionally engineered squeeze or whether such things are illegal in Germany or not, but this little episode does demonstrate that market manipulation, legal or not, is alive and well in Germany, and that before Merkel and others start throwing stones at the United States in regards to this little banking crisis and transparent markets, not to mention regulation and inappropriate (if not felonious) game-playing they may want to look around and insure they're not living in a glass house.
Perhaps we could start that inquiry with a discussion of Deutche Bank's leverage ratios and the transparency of their balance sheet..... |
