Hedge funds would have to entice holders that owned the remaining 10% of the company to sell their shares. Trading volumes spiked, as there was a supply-demand imbalance since neither Porsche nor the government were willing to let go of their shares. According to International Banker: “Ultimately, those hedge funds that had shorted VW stock ended up losing an estimated $30 billion from their trades.” Once they realised the position they were in, they started to buy the stock to cover their open short positions as it became clear that they could be victims of a Volkswagen squeeze.
Investment funds had reportedly borrowed around 12% to 13% of the company’s shares. In March that year, the company revealed that it had actually upped its stake to over 40%, while it also held around 31.5% of the company’s shares in cash-settled options.Ĭombined with the 20% stake the German government owned back then, it meant that less than 10% of the company’s float was actually available and accessible to traders and investors in the open market. However, Porsche did not stop buying shares of VW as market participants expected. In 2008, short sellers started to bet against the stock as they realised that Porsche would start limiting its purchases after they amassed a 30% stake in VW. This resulted in the price progressively climbing to higher levels in the following months. The history of the 2008 Volkswagen short squeeze can be traced back to 2006 when Porsche SE decided to start acquiring a sizable stake in the German automaker. In this article, we analyse if a Volkswagen short squeeze could happen again, remembering what prompted a similar event in 2008. With the price of WV stock currently standing nearly 46% below its 2021 post-squeeze high, is it possible that a similar event can happen again?
Back then, traders who frequented the Reddit messaging board Wall Street Bets coordinated efforts to pump the price of various stocks that institutional investors were shorting heavily.īy doing so, they prompted massive buying activity and managed to pull a Volkswagen stock squeeze that propelled the share price to its highest level since the historic 2008 Volkswagen squeeze. Volkswagen ( VOW3) stock became one of the targets of retail investors in the early 2021s during the so-called “meme stock” frenzy. Volkswagen stock predictions: Analyst sentiment.Can a Volkswagen short squeeze happen again?.US30 US Wall Street 30 (USA 30, Dow Jones)