VW Gamble Nets Porsche $20B, Wallops Hedge Funds

Short bets could push some European traders to bankruptcy after stock soars
By Jim O'Neill,  Newser User
Posted Oct 29, 2008 10:09 AM CDT
A change in the price of Volkswagen shares is displayed at the stock market in Frankfurt, Oct. 27, 2008.   (AP Photo)
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(Newser) – Hedge funds that bet on a dive in Volkswagen shares are nursing some pretty stiff hangovers—to the tune of a possible $20 billion in losses—after the shares soared when rival Porsche announced over the weekend it had secretly acquired a 74% stake in its fellow German automaker, reports the Independent. The losses could push some of the firms into bankruptcy.

Porsche today said it would sell some 5% of its stake in Volkswagen—which has risen 384% in value over the previous two days—to put some shares back in the market and reduce their volatility somewhat, AP adds. European hedge funds—which rely heavily on short selling—are expected to lose as much as $500 billion in the second half of 2008, analysts say.