Could The Porsche-Volkswagen Squeeze Cause Some Hedge Funds To Go Bankrupt?
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Hedge funds involved with the Porsche, Volkswagen (OTCBB: VLKAY) trade are upset that they lost billions, when Porsche increased its ownership position to 75% of Volkswagen. In fact, the London-based Alternative Investment Management Association (Aima), the hedge fund trade body, said that it planned to ask the EU to look at a controversial German legal loophole that allowed Porsche to secretly increase its Volkswagen stake to almost 75%.
Hedge funds often get in on the same trade as they also suffer from the same groupthink mentality that can hurt average investors in the market. Some of the hedge funds hit by the Porsche squeeze include SAC Capital, Och Ziff, Perry Capital, Greenlight Capital and Glenview Capital. This trade could be tough on them, especially as they are currently receiving redemption calls from their investors.
Deutsche Bank (NYSE: DB) has seen its shares plunge this week on claims it's exposed to the Porsche fallout.
Porsche has said it will sell about 5% of its Volkswagen stake to help ease the shortage of stock.
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