It’s not often that you read the funniest story of the day on the front page of the FT. Forget Brand and Ross; this is much better.
There the hedge fund managers were, happily short-selling Volkswagen shares when, suddenly, Porsche announced that it had built up a 74.1% stake in VW and was planning a takeover. Immediately, VW shares shot up making it briefly the world’s largest company. Short-sellers who had bet on the falling price were left facing losses of €30bn.
There is, of course, a serious side to this story. The FT is right to criticise Germany’s opaque stock market in its editorial. Most countries have rules to prevent stealth takeovers. In the UK, once a company acquires more than thirty percent of another company, it must launch a formal takeover bid. There are similar rules in Germany, except that, unlike in the UK, the acquirer doesn’t have to declare derivatives. It can therefore wait to cash in its options, then suddenly reveal that it has effectively taken a company over. Such a system clearly doesn’t prevent creeping takeovers and German newspapers are already calling for a change in the law, fearing that Germany’s reputation as a financial centre may be damaged.
But that said, you have to admit that the story has a funny side. An old fashioned company that actually makes things has shafted the wheeler-dealers in the hedge funds. One London auto industry analyst told the FT:
I have hedge fund managers literally in tears on the phone.
It couldn’t happen to a nicer bunch of people could it?
This is without question the biggest single loss on a single stock in the history of hedge funds. It’s a bloodbath.
I know it sounds churlish but I bet I wasn’t the only person chuckling into my newspaper this morning.