Family members knew that something was very wrong when Adolf Merckle, who had the family holding company VEM assets at fair management GmbH, performed by dozens of successful investments, left the house one afternoon in January 2009 and not return. That night, her fears were confirmed when a German railwaymen Merckle body near a suburban railway line near his hometown of Blaubeuren, about a hundred miles west of Munich. It was no secret that the recent financial crisis had come to … Read more »

Family members knew that something was very wrong when Adolf Merckle, who had the family holding company VEM assets at fair management GmbH, performed by dozens of successful investments, left the house one afternoon in January 2009 and not return. That night, her fears were confirmed when a German railwaymen Merckle body near a suburban railway line near his hometown of Blaubeuren, about a hundred miles west of Munich. It was no secret that the recent financial crisis had taken a toll on Merckle investment. He became known in Germany as a savvy investor, but had lost hundreds of millions of euros, after he caught on the wrong side of a short squeeze of epic proportions with Volkswagen stock. This was not the only big bet against shares of this company. A number of hedge funds, including Greenlight Capital, SAC Capital Glenview Capital and Perry Capital Asia Tigers lost billions of dollars in a few hours on their big short positions in Volkswagen shares after the news on 26 October 2008 because that Porsche AG had a great synthetic long position in Volkswagen stock obtained through cash-settled options. Over the next two days, this short squeeze produced a five-fold increase in Volkswagen shares, as demand for shares of hedge funds exceeded the supply of lendable shares.
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from
David P. Stowell
Theron McLarty
Source: Kellogg School of Management
10 pages.
Release Date: 3 June 2009. Prod #: KEL417-PDF-ENG
Porsche, Volkswagen and CSX: Cars, Trains and derivatives HBR case solution

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