Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


A TINY VIOLIN….Yesterday I read that Porsche had increased its ownership stake in VW to 74% and was seeking a “dominance” agreement that would give it control over the company. Today, via Tyler Cowen, the Financial Times reports that hedge funds are pretty unhappy about this:

VW shares rose 147 per cent after Porsche unexpectedly disclosed that through the use of derivatives it had increased its stake in VW from 35 to 74.1 per cent, sparking outcry among investors, analysts and corporate governance experts.

….The sudden disclosure meant there was a free float of only 5.8 per cent — the state of Lower Saxony owns 20.1 per cent — sparking panic among hedge funds. Many had bet on VW’s share price falling and the rise on Monday led to estimated losses among them of €10bn-€15bn ($12.5bn-$18.8bn).

“This was supposed to be a very low-risk trade and it’s a nuclear bomb which has gone off in people’s faces,” said one hedge fund manager.

Technically, the complaint is that Porsche has been less than transparent about its maneuverings, and it might well be that current German regulation is too lax in this regard. That aside, though, can I just say that my heart is not exactly breaking for the hedge funds who got burned here? The whole point of most hedge funds is to invest vast sums of money with the least possible transparency possible, and now they’re complaining because somebody else has executed a slick maneuver that made what was “supposed” to be a very low-risk trade into a money loser.

Well, guess what? There’s are no tablets from Mt. Sinai that guarantee hedge funds access to low-risk-high-return investments. Their bet turned out to be a bad one, and now they’re unhappy about it. Boo hoo.

For more, check out the first commenter to Tyler’s post. He explains pretty well what happened here and how the hedge funds got burned.

FOLLOW THE MONEY

Corporations and billionaires don’t fund journalism like ours that exists to shake things up. Instead, support from readers allows Mother Jones to call it like it is without fear, favor, or false equivalence.

And right now, a longtime friend of Mother Jones has pledged an incredibly generous gift to inspire—and double—giving from online readers. That's huge! Because you can see that our fall fundraising drive is well behind the $325,000 we need to raise. So if you agree that in-depth, fiercely independent journalism matters right now, please support our work and help us raise the money it takes to keep Mother Jones charging hard. Your gift, and all online donations up to $94,000 total, will be matched and go twice as far—but only until the November 9 deadline.

$400,000 to go: Please help us pick up the pace!

payment methods

FOLLOW THE MONEY

Corporations and billionaires don’t fund journalism like ours that exists to shake things up. Instead, support from readers allows Mother Jones to call it like it is without fear, favor, or false equivalence.

And right now, a longtime friend of Mother Jones has pledged an incredibly generous gift to inspire—and double—giving from online readers. That's huge! Because you can see that our fall fundraising drive is well behind the $325,000 we need to raise. So if you agree that in-depth, fiercely independent journalism matters right now, please support our work and help us raise the money it takes to keep Mother Jones charging hard. Your gift, and all online donations up $94,000 total, will be matched and go twice as far—but only until the November 9 deadline.

$400,000 to go: Please help us pick up the pace!

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate