'Masters of the Universe' brought down to earth?
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Doesn't change the fact it's a legitimate strategy for them and losses aren't infinite, you're buying for a finite amount, therefore the loss is a finite amount if you make one. There's no telling how big it'll be but that doesn't make it infinite.
Since there's no theoretical maximum value of a share in a company, the theoretical potential losses are infinite. Obviously in reality at a certain point the short seller can't afford to buy the shares he owes back and will therefore go bankrupt.
It's a (currently) legal strategy for them, it doesn't make it a legitimate one imo. Unfair market manipulation might be illegal, but the fact that no-one gets prosecuted for it doesn't mean it doesn't happen - it's notoriously difficult for the authorities to prove, and in recent years regulators have been told to be as light as possible as we don't really need regulation mm'kay?
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Soldato
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Short selling though isn't market manipulation, these are seperate issues; manipulation is just as likely to occur for long sales as for short.
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Utter rubbish. Banks providing credit to those who couldn't afford it and then selling on that debt through complex deals that no-one really understands or can keep track of, couple with individuals over-reliance on debt to live beyond their means will lead to people losing their jobs.
Short selling has sod all to do with it. Go to any other country in the world and you won't find a single mention of hedge funds being responsible for the current problems, it's just our press who are running this this particular non-story.
Possibly, but then again that's where the current focus is. A year ago this wouldn't have been a story outside the FT. It's like crime; certain crimes don't appear in the press at all and then as soon as one comes along the media focuses on it and we suddenly have 'rise' in this type of crime. Actually there isn't a rise, just a rise in reporting, for a while.
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Well, bigredshark and Dj_Jestar certainly seem to think Porsche were being secretive about it.
Quite why they think this when Porsche a) have been marching on this path ever since taking a stake in VW for the first time and b) actually stated they were going to do this back in ******* March I'll never know....
Those investors who got hit by this ought to have been paying rather more attention.
Because Porsche all along were denying a takeover. Yes, it may have been blindingly obvious, but the Hedge Funds saw that Porsche were being naughty. You CANNOT deny a takeover if that is what you are doing. Infact just simply not delcaring your intention to takeover is illegal. Hence the Hedge funds predicted this would hit Porsche/VW hard, thus the price of shares plummet. Porsche were lucky to get away with this, hence the $20bill loss for Hedge funds.
No, Porsche denied that they were going to take over VW in 2007. When the EU courts began to further challenge 'Volkswagen Law' (which held that no shareholder could exercise more than 20% of the voting rights no matter how much stock they owned) they then announced that they'd increase their stake further. By September this year, they had 35% and VW was effectively a subsidiary of Porsche.
It wasn't just blindingly obvious, it was so obvious that anyone who advised these people to short sell ought to be lynched....
*sigh*
They did declare their intentions. They said that they were going to increase their stake due to Volkswagen Law being under threat from the EU courts. Apparently the hedge funds completely missed that one.
Porsche needed to make sure VW was secure. They didn't want to see the company get broken up and buggered about with just so some investors could make a quick buck, so they took action. They announced their plans back in March. The FT still has the article on their website. You're seriously telling me that Porsche were hiding this from people? I've been reading about this bloody plan for two years!
Well, the hedge funds were morons then. Because Porsche told everyone what they were going to do, did it, and have reaped the reward - their long-time technology partner is now as safe as possible.
Soldato
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Safe from what?
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[DOD]Asprilla;12793657 said:
Hedge funders breaking it up and selling parts of it off.
Soldato
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So, safe from something that doesn't happen, as I've already mentioned. Excellent work all round.
Hedge funds don't have the skill sets, the inclination or the resources to do that. They are traders in equities, futures and currency same as any other business on the stockexchange, including pension funds.
They are not private equity funds or asset strippers; totally the wrong kind of business.
http://en.wikipedia.org/wiki/Short_selling
There's a mechanism called "stop short order" which they'll have used to limit their liabilities.. but what is funny - just look at the named lenders in the Wikipedia entry..
There's a mechanism called "stop short order" which they'll have used to limit their liabilities.. but what is funny - just look at the named lenders in the Wikipedia entry..
[DOD]Asprilla;12793724 said:
Quick google shows that it does happen: http://www.dutchnews.nl/news/archives/2006/12/stork_may_face_hedge_fund_lega.php
According to Wiki, Stork was eventually bought by a PE firm, who sold Stork's food systems unit to a firm owned by Icelandic bank Landsbanki Íslands.