One of the richest men in the world German Adolf Merckle committed suicide last week after he lost a fortune getting caught in a 'short squeeze' that ultimately threatened to destroy his business empire. Merckle shorted the stocks of Volkswagen, that is betting VW stocks would fall. Instead, their stocks jumped in October from from below €200 to over €1000 per share making Volkswagen for a brief period the world's most valuable company. Merckle along with a whole slew of hedge funds who had shorted huge amounts of VW stock got killed (literally for Merckle...) thanks to Porsche.
On paper, Porsche made between €30-40 billion in the affair. Once all is said and done, the actual profit is closer to some €6-12 billion. To put those numbers in perspective, Porsche’s revenue for the whole year of 2006 was a bit over €7 billion.Porsche’s move took three years of careful maneuvering. It was darkly brilliant, a wealth transfer ingeniously conceived like few we’ve ever seen. Betting the right way, Porsche roiled the financial markets and took the hedge funds for a fortune.
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[Via]