Volkswagen the Most Valuable Company in the World on Tuesday
October 29, 2008
An odd thing happened to Volkswagen stock on Tuesday; it rocketed to $230 a share and it had nothing to do with fundamentals.
This jump in price was caused after Porsche announced over the weekend plans to increase its stake in Volkswagen from 42.6% to 75%. With few shares outstanding (less than 5%) and a potential increase in the stock price as a result of Porche buying stock, many short sellers decided to close their positions and buy back the shares.
The result of this was a short-squeeze. Friday the shares were trading at $57 and when Monday trading opened, the shares were trading at $95 a share. This continued until Tuesday when the stock peaked at $230, surpassing the value of all of the automakers combined.
