Porsche proved this week that it knows how to drive the market as well as the road. Like a 911 Turbo on the autobahn, the hedge funds and other short-sellers never saw it coming. Suddenly there was Porsche disclosing it had amassed an indirect 31.5% stake fellow German carmaker Volkswagen ( VLKAY.PK) on top of its 42.6% direct stake. After accounting for the 20% held by the German state where Volkswagen is based, about 5% of equity was left to settle any open short positions, according to Forbes.
Porsche has taken the pole position from Volkswagen.
What a squeeze! It's not often you see hedge funds this outrageously outmaneuvered, as evidenced by the 123% burst in Volkswagen's share price on Monday and the 95% jump on Tuesday -- reaching an unprecedented intraday high of 1,005.01 euros ($1,282.94). Mercifully, Porsche agreed to sell up to 5% of its indirect stake to "give red-faced short-sellers some room to breath," as Forbes put it. So not only did Porsche squeeze the shorts, it also will earn a tidy sum by bailing them out and will still be well positioned to step into the driver's seat at VW. Folks who know the German carmakers shouldn't be too surprised that Porsche is buying VW. I've been hearing rumblings about Porsche's interest in gaining control of VW for a long time. And never discount the bad blood among the heirs to Ferdinand Porsche, who designed the original VW Bug back in the day before he founded Porsche.
The original Bug, designed by Porsche
His heirs remain at both companies -- so no doubt the family drama is on par with the market drama we've seen. One thing's clear: It's hard to keep up with a Porsche.