How long did the VW short squeeze last in 2008?
How Long Did the VW Short Squeeze Last in 2008? Have you heard of the VW short squeeze of 2008? It lasted four days and fell 58% from its high. Hedge funds took weeks to recover from that.
How much did hedge funds lose in the Volkswagen squeeze?
Hedge funds lost about $30 billion, while Porsche made bank. However, the interesting thing is that the squeeze didn't last. Most hedge funds maintained their positions and they were rewarded by a 70 percent dip just one month after the Volkswagen squeeze.
What happened to the VW Infinity squeeze?
The VW Infinity Squeeze. Following the announcement by Porsche, the resulting panic caused a short squeeze in VW shares that saw the deeply troubled automaker briefly become the most valuable company in the world – despite being in the middle of the worst financial crisis since the great depression.
What caused the price of Volkswagen stock to go up?
Supply and demand got wild. Porsche shined light on the panic in a very engineered way. And so, it caused the price of Volkswagen to go hyperbolic as short sellers needed to get the hell out of their positions, further driving the price of the stock up.
What was the highest price during the Volkswagen Squeeze?
This squeeze led to the share price reaching an all-time intraday high of US$483 on January 28, 2021 on the NYSE. This squeeze caught the attention of many news networks and social media platforms.
What was the biggest squeeze in stock history?
Meta Platforms Inc. lost $232 billion in one day, making it the largest single-day loss in stock market history. In 2021, GameStop(GME) was the subject of a remarkable short squeeze that caused some hedge funds to lose billions of dollars.
How long did VW squeeze peak last?
It lasted four days and fell 58% from its high. Hedge funds took weeks to recover from that. For those of you following the hype of GameStop the last number of weeks, it might have felt erringly familiar.
What did VW stock hit in 2008?
VOW. F - Volkswagen AGDateOpenHighOct 29, 2008527.03597.96Oct 28, 2008484.52978.92Oct 27, 2008365.86604.16*Close price adjusted for splits.**Adjusted close price adjusted for splits and dividend and/or capital gain distributions.1 more row
How much was Volkswagen shorted?
It is estimated the VW short squeeze cost short sellers about £30 billion ($38.33 billion).
When was Volkswagen short squeeze?
2008The biggest short squeeze in history occurred in 2008 when Porsche embarked on an unexpected series of maneuvers that left it controlling a huge percentage of Volkswagen's (VW) stock. This briefly made VW the most valuable listed company in the world.
How high can a short squeeze go?
If you short a stock at $10, it can't go lower than zero, so you can't make more than $10 per share on the trade. But there's no ceiling on the stock. You can sell it at $10 and then be forced to buy it back at $20 … or $200 … or $2 million. There is no theoretical limit on how high a stock can go.
Why did Volkswagen short squeeze?
Panic among short sellers set in, and the supply-demand imbalance triggered a monumental short squeeze that drove its share price up from €210.85 to more than €1,000 in less than two days. Indeed, Volkswagen became the world's largest company by market value on October 28—albeit, very briefly.
What was Volkswagen highest stock price?
At the end of trading yesterday, VW's share price closed at €675 ($847), a gain of 33% on the day, but not enough to hold onto the title of world's largest company by market capitalization. The secret to VW's earlier valuation success, say the analysts, lay in its successful hedge-fund trading strategies.
How long will a short squeeze last?
Takeaway #1: Short squeezes typically don't last long. The Volkswagen short squeeze took the longest amount of time to climax at 31 trading days. The average short squeeze in this data set lasted approximately 12 days from the onset to the peak.
When should you sell in a short squeeze?
A short interest ratio of five or better is a good indicator that short sellers might panic, and this may be a good time to try to trade a potential short squeeze.
Did the Gamestop short squeeze Work?
On January 26, it was reported that short sellers had lost a total of $6 billion due to the squeeze. According to Morgan Stanley, a number of hedge funds covered their short positions and sold shares in their portfolio to reduce leverage and market exposure, in some of the largest such actions within 10 years.
How long did the VW short squeeze last?
How long the Volkswagen short squeeze lasted. The bulk of the Volkswagen short squeeze lasted just four days, after which shares had fallen 58 percent from their peak. However, it took weeks for VW stock to falter enough for most of the squeeze to have been returned to hedge funds at last.
How much money did hedge funds lose on Volkswagen?
Hedge funds lost about $30 billion, while Porsche made bank. However, the interesting thing is that the squeeze didn't last.
What hedge fund shorted GameStop?
One of the hedge funds that shorted GameStop ("GME" on the NYSE) is called Melvin Capital. Over the course of January 2021, Melvin lost a massive 53 percent of its assets under management. Most of the loss impacts wealthy investors, but it also impacts pensioners operating under the hedge fund.
Did the Volkswagen squeeze last?
However, the interesting thing is that the squeeze didn't last. Most hedge funds maintained their positions and they were rewarded by a 70 percent dip just one month after the Volkswagen squeeze. Article continues below advertisement.
What was the biggest short squeeze in history?
The Biggest Short Squeeze In History. Following the announcement by Porsche, that panic caused a short squeeze in Volkswagen shares. This massive short squeeze led the world to see the deeply troubled automaker briefly become the most valuable company in the world. Supply and demand got wild.
How much was Volkswagen short interest in 2008?
But even by October of 2008, the short interest seemed not-too excessive. It stood at just 12.8% of outstanding shares being short.
What is short squeeze?
In short form (not a pun) – A short squeeze is when a stock aggressively increases in price causing short sellers to have to cut losses and exit their positions, inadvertently further driving up the price per share of said stock.
What was the automotive industry in 2008?
The Automotive Industry In 2008. For reference, in 2008, the whole auto sector was considered to be a pretty sexy short trade. Up until 2008, General Motors had been the largest automaker in the world for literally over 70 years. I mean, damn. That’s a long run.
When did Porsche take a swing in the world of financial maneuvers?
This was, and still is considered, the biggest short squeeze in history! In late 2008, amidst the global financial crisis: Porsche took a swing in the world of financial maneuvers. After a series of clever, intense moves, this all set the path moving for Volkswagen to briefly become the most valuable company in the entire world.
Was Volkswagen in debt before the crisis?
Even before the crisis, Volkswagen was quite thoroughly in debt. They were already struggling financially, and in the midst of the crisis, of course, demand for new cars plummeted. BUT WAIT.. A TWIST! Despite its messy financials, Volkswagen had reported several quarters of better than expected earnings.
Did Porsche drop a short position?
To make sure short sellers understood the urgency of the sitch, Porsche drop ped a statement to address the short position. They said that they had… “decided to make this announcement after it became clear that there are by far more short positions in the market than expected.” “The disclosure should give so called short sellers – meaning financial institutions which have betted or are still betting on a falling share price in Volkswagen – the opportunity to settle their relevant positions without rush and without facing major risks.” So… Problem solved, right? Wrong! The statement pretty much had the opposite of a disarming effect. And well… do you really think their goal was to calm everyone down?
What caused the VW Infinity Squeeze?
The VW Infinity Squeeze. Following the announcement by Porsche, the resulting panic caused a short squeeze in VW shares that saw the deeply troubled automaker briefly become the most valuable company in the world – despite being in the middle of the worst financial crisis since the great depression.
When did Porsche increase its stake in VW?
On October 26 th, 2008, rival automaker Porsche made a surprise announcement that it had increased its stake in VW to over 74%. It was a stealth move, made possible through the use of multiple purchases of cash-settled derivatives which had been accumulated separately through different European investment banks.
What was the Infinity Squeeze?
Volkswagen Infinity Squeeze. The October 2008 short squeeze on shares of Volkswagen AG has since been referred to as the “Mother of all Squeezes”. It was also perhaps the earliest use of the term “Infinity Squeeze”. It was during the middle of the worst financial crisis since the Great Depression, and Volkswagen was increasingly being viewed as a potential bankruptcy candidate. In other words, Volkswagen was viewed as an exceptionally attractive short candidate. However, at very depth of the crisis, an orchestrated short squeeze on VW shares caused VW to briefly become the most valuable company in the world, worth more by market cap than Exxon Mobil.
How much did Porsche make in 2008?
In 2008, as a result of the VW infinity squeeze, Porsche earned a bottom line profit of nearly €7 billion. For 2008 alone, CEO Wiedeking received a bonus of €80 million. He was then “pushed out” of Porsche in 2009, but was given an additional bonus of €50 million on his way out.
Why did luxury car sales fall?
Luxury car sales were plunging due to the crisis and Porsche was already saddled with significant debt. On the other side of the trade, the hedge funds who had sold VW short quickly saw their collective losses exceed $30 billion.
How much did Steve Cohen lose on VW?
SAC Capital’s Steve Cohen had said that his fund alone had lost $250 million in just one week on VW. Steve Cohen Tells Paul Tudor Jones About Two Worst Days of His Life (Business Insider, Feb. 2011) Various funds would end up filing civil suits against Porsche to attempt to recover their losses.
Is VW a short candidate?
In other words, Volkswagen was viewed as an exceptionally attractive short candidate. However, at very depth of the crisis, an orchestrated short squeeze on VW shares caused VW to briefly become the most valuable company in the world, worth more by market cap than Exxon Mobil. The VW infinity squeeze seemed entirely counter intuitive at the time.
What is the result of the short squeeze?
The result of the current short squeeze could be increased regulations over retail traders. Even if you don't follow stock market news, you've probably been inundated with news with what's happening to GameStop stock on social media.
What happened to GameStop stocks in 2008?
A group of angry Redditors have caused billions of dollars of damage to hedge funds shorting GameStop stocks. In 2008, Porsche gobbled up so much Volkswagen's stock it caused VW's stock prices to soar, which similarly caused short sellers to lose tens of billions of dollars in a span of a couple days. The result of the current short squeeze could ...
What is short selling?
Short selling is a type of strategy that traders use to speculate on a future drop in the price of a particular stock.
Short selling example
The best way to understand this trading strategy is by looking at the following example.
Short squeeze meaning
A short squeeze, on the other hand, is when the price of a stock begins to rise rapidly, forcing short-sellers who had bet against the stock to hastily buy the stock back to avoid incurring further losses.
Why the Volkswagen short squeeze happened and how it unfolded
During the global financial crisis of 2008, something strange happened. Volkswagen went through a short squeeze and briefly became the biggest company in the world.
Bottom Line
If a hedge fund or a trader believes that shares of a company are overpriced, they can choose to short the stock. As mentioned earlier, a trader who is short selling a stock doesn’t own the shares but is promising to return them later to his broker.
