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.