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Vw short squeeze chart7/24/2023 ![]() Against this backdrop, in late 2008 a short bet on troubled Volkswagen seemed like an absolute no brainer. Automaker Chrysler would file for bankruptcy at roughly the same time in 2009. But by December 2008, GM was being bailed out by the US government and by 2009 GM had entered bankruptcy. As a reminder, up until 2008, General Motors had been the largest automaker in the world for more than 70 years and had over 200,000 employees. In fact, as the financial crisis unfolded in 2008, the entire auto sector was considered to be a highly attractive short trade. Combined, these factors made VW a seemingly very attractive short candidate as the financial crisis unfolded in 2008. Despite its troubled financials and business prospects, VW had reported several quarters of slightly better than expected earnings, leaving its share price surprisingly elevated at over €300. Even before the crisis, heavily indebted VW had already been struggling financially, and in the midst of a crisis, demand for new cars would surely plummet. In other words, stocks which appear to be the “best short ideas” are also the ones which often end up being most likely to see the most violent short squeezes.Īt the peak of the Great Financial Crisis in October 2008, Volkswagen had been (rightfully) viewed as a high probability bankruptcy candidate. Such aggressive over-shorting only occurs when the bear thesis against the fundamentals is conclusively strong and very well disseminated. All infinity squeezes are the result of heavy over-shorting of shares which then become difficult or impossible to cover. The VW infinity squeeze seemed entirely counter intuitive at the time. 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. ![]() In other words, Volkswagen was viewed as an exceptionally attractive short candidate. 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. It was also perhaps the earliest use of the term “Infinity Squeeze”. ![]() The October 2008 short squeeze on shares of Volkswagen AG has since been referred to as the “Mother of all Squeezes”. How Martin Shkreli caused a 10,000% squeeze on KBIO ![]()
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