
The day Volkswagen briefly conquered the world (2018) - zt
https://ftalphaville.ft.com/2018/10/31/1540962002000/The-day-Volkswagen-briefly-conquered-the-world/
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ckastner
I remember watching this live as it happened, it was fantastic. Reporting
requirements of regulated exchanges should make scenarios like these
impossible, but Porsche found a loop hole and squeezed the shorts.

Relevant section:

 _With 12 per cent of the shares outstanding sold short, it was mathematically
impossible for every short-seller to buy a share, and therefore close their
position._

 _In other words, half the room were going to be left in a burning building
with no way out. A panicked dash for the exit began._

Edit: for context, I was working for a bank at the time, and implemented the
procedure that monitored holdings for the limits above/which reporting
requirements would be triggered. The rules are quite extensive, and it was an
incredible feat to gain control over such a large share of VW stock without
violating any of the actual rules.

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hermitdev
Eh, there are ways around the lack of shares being publicly available to cover
the short. Stock loan agreements and triparty agreements are two ways.
Granted, this is OTC and you have to have willing participants, but it is
possible.

I used to work in back office IT for a hedge fund and had to manually set
these up in our systems all the time. Currently work for a Mutual Fund. Dont
think current employer engages in this.

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mannykannot
Stock loans from whom, in this particular case? Not Porsche, I would guess. If
you can't find a counterparty, that's a red flag?

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neonate
[http://archive.is/AZj5W](http://archive.is/AZj5W)

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kuroguro
[https://outline.com/E6XJsF](https://outline.com/E6XJsF)

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matthewowen
If you enjoyed this you may also enjoy reading about Piggly Wiggly:
[https://www.newyorker.com/magazine/1959/06/06/a-corner-in-
pi...](https://www.newyorker.com/magazine/1959/06/06/a-corner-in-piggly-
wiggly/amp)

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PhasmaFelis
That sounds awesome. Is there a version of the story that doesn't demand
personal info to read it? This site wants me to enter info about my career and
job title before I can view anything.

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Wheaties466
[https://outline.com/E6XJsF](https://outline.com/E6XJsF)

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tshanmu
this is a fascinating read! - I do have a basic question: when do short
sellers realize that the total outstanding shares are not enough to close
position - or the assumption is that the same share can be used to settle
multiple shorts at different times? thanks, HN!

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hermitdev
Usually this handled via a stock loan or triparty agreement. A stock loan is
an OTC (over the counter agreement, e.g. not on an exchange) when firm A
"borrows" the shares from firm B and then after a term, either need to return
the shares, or possibly offer cash compensation. This helps to cover the
short. Versus a naked short, where you don't actual have possession of the
shares you're selling. In my experience, naked shorts are rare, but I dont
know how my experience plays out to the industry et large.

A triparty agreement is somewhat similar, but well, involves 3 parties instead
of 2. Who gets what isn't always immediately clear to a casual observer. These
can get quite nuanced and difficult to understand.

~~~
tshanmu
thanks!

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draw_down
> The thing to learn [from the short-squeeze] is that, it's such a rare
> experience and special case, we should not overreact.

One of my favorite points from “The Black Swan” is how Taleb points out that
the few biggest market-moving days make up all the action in the market; the
days in between are close to noise.

This is also a bit like saying after a car crash “this is such a rare event,
all the other times I drove I didn’t crash. So let’s not get too hasty here”

