porsche shares

[crustychief]

http://news.yahoo.com/s/afp/20090106/ts_afp/germanyautocompanytakeoverporschevw


FRANKFURT (AFP) – German luxury sportscar maker Porsche has taken over Volkswagen, the biggest European car manufacturer, after purchasing more than 50 percent of VW shares, Porsche said.

Porsche said in a brief statement late Monday that by buying new VW shares, it "will thus increase its participation to 50.76 percent" of the group's capital, compared with 42 percent before.

The news sent Volkswagen shares rocketing up 13.48 percent in early afternoon trading on the Frankfurt stock market on Tuesday.

The takeover by a family-run company run by billionaire shareholders has been a culture shock for Volkswagen, a sprawling national institution seen as a model for cooperation between shareholders and unions.

Porsche launched its takeover bid in 2005, saying it would turn Volkswagen into a "normal" enterprise and incurring fierce opposition from the unions.

Porsche had initially planned to acquire more than 50 percent of VW's stock last year but was forced to delay the operation after the value of the shares soared amid frantic stock market speculation.

At one point, they traded for more than 1,000 euros (1,350 dollars) per share, making VW briefly the biggest company in the world by stock market valuation.

[Dottore]

Can someone explain to me why the VW shares should rise disproportionately on news of the takeover by Porsche, while the Porsche shares stay much the same?

[Zeke]

Originally Posted by Dottore

Can someone explain to me why the VW shares should rise disproportionately on news of the takeover by Porsche, while the Porsche shares stay much the same?

I'm probably the last guy to listen to, but wouldn't that be because Porsche shifted capital to a company that they barely own half of as supposed to owning all of their own?

[Dottore]

Well from my naive perspective, Porsche shareholders, who once owned one of the smallest car manufacturers in the world, suddenly own one of the largest.

I would have thought that should boost the Porsche share price.

[crustychief]

http://news.yahoo.com/s/ap/20090106/ap_on_bi_ge/eu_germany_obit_merckle


This just in. Poor dude is probably sitting on a cloud shaking his head.

BERLIN – German billionaire Adolf Merckle threw himself in front of a train after his business empire, which included interests ranging from VW cars to pharmaceuticals to cement, ran into trouble in the global financial crisis, his family said Tuesday.

The 74-year-old's body was found Monday night on railway tracks at Blaubeuren in southwestern Germany, prosecutors in nearby Ulm said in a statement. They described the death as a "railway accident" and said there was no evidence that anyone else was to blame.

His family, which had reported Merckle missing after he failed to return home Monday, issued a brief statement saying he took his own life. A person close to the investigation, who requested anonymity because he was not authorized to speak with the media, said Merckle left a suicide note. Its contents were not divulged.

Merckle's holding company, VEM Vermoegensverwaltung, recently had been in talks with banks to secure credit after its business interests ran up high levels of debt, and also lost value amid the global financial crisis.

The company declined to say how much it needed, or to comment on German media reports that it might have to sell some of its interests.

In addition, the holding company recently said it had suffered heavy losses on shares of automaker Volkswagen AG, which fluctuated wildly last fall as fellow car maker Porsche SE moved to increase its stake in the company.

"Adolf Merckle lived and worked for his family and his firms," the family statement said.

"The distress to his firms caused by the financial crisis and the related uncertainties of recent weeks, along with the helplessness of no longer being able to act, broke the passionate family businessman, and he ended his life," it said.

Merckle's business interests included generic drug maker Ratiopharm International GmbH and cement maker HeidelbergCement AG.

Merckle helped turn his grandfather's chemical wholesale company into one of Germany's biggest pharmaceutical wholesalers, Phoenix Pharmahandel, in which he held a 57 percent stake.

He used his wealth, estimated by Forbes last year to be $9.2 billion, to take stakes in HeidelbergCement and Ratiopharm. HeidelbergCement shares were down 5.8 percent at euro31.39 ($43.18) in Frankfurt trading after news broke of Merckle's death.

Merckle also owned stakes in companies that made a wide array of goods from all-terrain vehicles, software to textiles.

The governor of Merckle's home state of Baden-Wuerttemberg, Guenther Oettinger, said the region had lost a "great entrepreneurial personality" who built up a "business of European significance."

Merckle was awarded Germany's highest decoration, the Bundesverdienstkreuz, in 2005.

Despite his wealth and prominence in corporate Germany, Merckle mostly avoided publicity. He is survived by his wife, Ruth, and four children.

____

Associated Press Writer Oliver Schmale contributed to this report from Stuttgart, Germany.

[competentone]

Originally Posted by Dottore

Can someone explain to me why the VW shares should rise disproportionately on news of the takeover by Porsche, while the Porsche shares stay much the same?

It is called a "short squeeze." Specifically, with the VW situation, it was effectively "naked short sellers" getting squeezed.

Short selling is an action one can take when one expects the price of a stock to drop. One borrows shares from someone who currently owns shares (paying 'interest" on the borrowed shares), sells the shares into the open market, then expects to buy them back later in the open market for a lower price, returning the borrowed shares and pocketing the difference between the price the short seller sold at and purchased back at.

If news develops that starts driving the price of the stock higher, those who have "sold shares short" will scramble to "cover" their short positions -- that is, they try to buy shares in the open market to return to those they have borrowed from. This "covering" can often drive the price of the stock higher.

With the VW situation, there were those who engaged in options trades which created effective short sales of shares that never existed. The positions were effective "naked short sales." If someone makes a "naked short sale" -- one offers to sell shares in the open market without borrowing any real shares.

Individuals really cannot engage in "naked short sales"; this is an action (which really represents fraud) the major investment houses engage in.

The investment houses can make a lot of money if they engage in naked short selling and the price of the stock they are selling drops. Companies have been "targets" in schemes of naked short selling -- this is one of the most corrupt segments of Wall Street, but that's another story.

Porsche "turned the tables" on the naked short sellers of VW's stock. When Porsche effectively demanded delivery of actual VW shares, those who had been selling "fictitious" shares (or in this case, those who had offered to sell shares they didn't own) suddenly had to own shares or risk be exposed as the liars and thieves they actually are.

Subsequently, there was a tremendous bidding war to acquire real VW shares and the market price of VW's stock skyrocketed.

It was probably some of the government's bailout money (from the bailouts in both the U.S. and Europe) which the investment banks used to cover the naked short sales they had engaged in. The VW situation is one of many misdeeds the major investment banks have engaged in; they would have likely been "caught with their pants down" on this one, if the taxpayer hadn't been forced to bail them out.