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Globe and Mail – Since many hedge fund managers like to drive Porsche roadsters, it’s somehow appropriate that the German auto maker just ran them down.
The European hedge fund community took a pounding Monday covering short positions in Volkswagen. Shares in the auto company doubled Monday on a short squeeze that came after Porsche announced it had used derivatives to build a 74 per cent stake in VW. That move brought a long-running takeover near the finish line, and also meant portfolio managers betting on a drop in Volkswagen shares had to cover positions.
In their rush to cover shorts, often at massive losses, hedge funds pushed up the value of Volkswagen by 123 per cent on Monday, briefly making the auto maker the largest company on earth. Shares subsequently slipped, but ended the day up 25 per cent.
Hedge fund manager David Einhorn’s Greenlight Capital suffered heavy losses in his portfolio when German carmaker Volkswagen’s shares spiked 82 percent on Tuesday, people familiar with his portfolio said.
The German carmaker briefly zoomed past Exxon Mobil to become the world’s biggest company by market value as hedge funds who bet Volkswagen’s price would drop further were forced to cover their positions.
Carmaker Porsche Automobil Holding SE surprised the market by announcing it had effectively gained control of 74 percent of Volkswagen’s voting shares.
Reuters HK – Share prices were sharply lower at mid-morning, with the key index briefly slipping below the 12,000 level, on global recession fears and worries about hedge fund redemptions.
Dealers noted concerns that the Japanese yen’s surge against the US dollar will force more unwinding of positions by some funds as they seek to repay yen-denominated loans.
China banks were sharply lower after China Construction Bank (CCB) and Industrial and Commercial Bank of China (ICBC) reported disappointing third-quarter results.
Commodity firms slumped on ongoing worries that a global economic downturn will reduce demand for energy and raw materials.
CNBC – Cramer got a chance Thursday to check in briefly with CSX Chairman and CEO Michael Ward.
Ward’s been a regular guest on Mad Money as his company has battled with activist hedge funds fighting to have him ousted.
Those hedge funds have managed to get two people on CSX’s board of directors, and another two are pending approval based on a lawsuit that proceeds to oral hearings this coming Monday, Aug. 25 in the Second Court of Appeals in New York.
“Maybe they can actually help,” Cramer said of the board additions.
