![]() This is not without risk, because the borrowed stock has to get returned, and the price may not go down, but rise, creating a situation where the investors will lose money on the trade. Earning a return from the price difference between the two. Usually, traders borrow a specific quantity of shares they plan to sell during a higher market price and repurchase the stock after a decline. In most cases, investors do not own the asset they are trading. Short selling is a trading strategy, implemented by investors that bet on a future decline in the price of a specific stock. ![]() Porsche Won In The Volkswagen Short Squeeze of 2008.How Long Did the 2008 VW Short Squeeze Last?.Characteristics of a High Short Interest Stock.We are going to explore the example and draw a few conclusions that can be useful not to get trapped in that situation.Īlso Read: How to Trade the Squeeze Momentum Indicator Contents But the 2008 VW short squeeze is a good case example. And historically there are other events that more or less follow the same pattern. This was not a prolonged event, it occurred over 4 days, and resulted in a decline of 58%, forcing hedge funds to mobilize in an attempt to recover from the undermining situation.įor a better perspective, this case from over 13 years ago is very similar to what happened with GameStop. One such example was the Volkswagen short squeeze. "Hardly a single other German corporate dynasty acts in such unpredictable and relentless way as the Merckle clan from Blaubeuren."įorbes recently ranked Merckle as the fifth-richest person in Germany, with a fortune worth an estimated $9.2 billion.Īccording to Forbes, Merckle's fortune was inherited from his Bohemian grandfather, but he has nurtured a chemical wholesale company, Phoenix Pharmahandel, into the largest pharmaceuticals wholesaler in Germany, with annual sales of €21.6 billion.The global financial crisis in 2008 created many turbulent situations for some of the largest companies, especially in the car manufacturing industry. "Adolf Merckle collects companies like others collect watches," wrote Manager Magazin, in one of the few extensive portraits of the German billionaire. He has assembled a business conglomerate with about 100,000 employees and €30 billion in annual sales. Ratiopharm and HeidelbergCement are just two companies in Merckle's vast portfolio, which also includes a maker of grooming vehicles for ski slopes, a sugar refinery and one of Germany's oldest foundries. The losses have fueled speculation that the industrialist could sell the generic drug company Ratiopharm or part of his stake in HeidelbergCement, both of which are based in Baden-Württemberg. But Merckle has become the most well-known casualty of the massive short-squeeze that briefly made VW the world's most valuable company late in October, when its share price rocketed to just over €1,000, or $1,260, from €210 in two trading sessions. Little is publicly known about the 74-year old industrialist who lives in the southwest German state of Baden-Württemberg and is said to enjoy skiing and mountain-climbing. ![]() ![]() "He had a reputation for being very, very prudent, very cautious - a typical entrepreneur who always remained down to earth," said one analyst, who asked to remain anonymous because he was expressing a personal view rather than his bank's opinion. Merckle, the 94th-richest person in 2008, according to Forbes magazine, incurred massive losses from wrong-way bets on Volkswagen shares, putting him under pressure to sell some assets or seek bridge loans. FRANKFURT - The German billionaire Adolf Merckle may be media-shy, but he is not afraid to place big bets and make the headlines on the back of them.
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