Porsche CEO resigns, hedge funds rejoice at short squeeze reversal
For three years from 2006 through 2008, Porsche accumulated shares of fellow German carmaker Volkswagen in hopes of executing a takeover. But some of the hottest hedge funds on Wall Street believed that shares of Volkswagen would fall as soon as Porsche stopped buying and market equilibrium returned. They shorted Volkswagen like crazy.
Then on October 26 Porsche revealed that it controlled, either through stock ownership or options, 75 percent of all Volkswagen shares. The German state of Lower Saxony controlled another 20 percent. This left only 5 percent in circulation. And hedgies had shorted VW stock to the tune of billions of dollars.
Flash forward to today: Porsche CEO Wendelin Wiedeking announced he would be leaving the company, hours after the board of directors approved terms for an emergency $5 billion cash injection from Qatar. His exit came after months of humiliating groveling for capital -- often at the feet of the very hedge funds Wiedeking had skunked -- to stave off a mound of debts that Porsche had built up during its VW ownership quest. While some hedgies probably hoped Porsche would be forced to sell itself to VW or, even better, go belly up, the same smartest guys in the room that Wiedeking bested are likely toasting his demise.