How Porsche Played the Market and Won
January 8th, 2009
Here’s a great story about how Porsche rocked the financial world and made an absolute fortune on VW stock. If this was as meticulously planned as the story contends, it’s one of the most brilliant financial moves of this generation.
For three years, Porsche kept accumulating VW stock without telling anyone how much it owned. Every time it purchased more, the amount of free-floating VW stock would decrease, driving the stock price up slightly; your basic supply and demand at work. Eventually the share price became high enough that, to outside observers, it wouldn’t have made any sense for Porsche to buy Volkswagen. It would simply have cost too much.
To explain what happened next, I’m going to first tell you about a financial maneuver called shorting.
Dr. Ferdinand Porsche and I share the same birthday — September 3. It’s not a coincidence.