Porsche runs down hedge funds

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.

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