Billionaire Merckle Said to Need as Much as EU1.1 Billion

Nov. 18 (Bloomberg) — Germany’s billionaire Merckle family, stung by losses on Volkswagen AG shares, needs as much as 1.1 billion euros ($1.4 billion) in financing to avert insolvency of its investment company, four people familiar with the situation said.

The family’s investment company VEM Vermoegensverwaltung GmbH may be forced to file for insolvency if a so-called standstill agreement that would freeze banks’ claims isn’t extended before today’s deadline, said the people, who declined to be identified because the talks are private. Merckle needs between 600 million euros and 1.1 billion euros, the people said.

Adolf Merckle, 74, whose estimated $9.2 billion fortune puts him 94th on Forbes’ list of the world’s richest people this year, needs financing after losing as much as 700 million euros on wrong-way bets on VW stock and the value of HeidelbergCement AG, which it owns, plunged, the people said. A failure of VEM could have repercussions for Merckle’s holdings, which span as many as 30 companies in the cement, machinery and pharmaceutical industries, said the people.

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Volkswagen May Face DAX Ouster as Deutsche Boerse Changes Rules

Oct. 31 (Bloomberg) — Volkswagen AG’s common shares may face removal from Germany’s DAX Index as early as next week after the benchmark’s compiler changed inclusion rules to stem disruptions spurred by gyrations in the automaker’s stock.

Deutsche Boerse AG, operator of the Frankfurt stock exchange, said in a statement today that from Nov. 3 it may at any time remove a DAX stock whose weighting exceeds 10 percent and whose share price over the preceding 30 trading days had annualized volatility of more than 250 percent.

“The exchange wants to guard that indexes are reliable and not exposed to these unusual swings,” said Carlos Sanchez, a sales trader at Interdin Bolsa SVB SA in Madrid. “It would seem like Volkswagen common shares are on the way out.”

Volkswagen’s weighting will be cut to 10 percent at the end of trading today and may increase next week if the shares outperform the benchmark. The stock’s volatility has climbed to about 395 percent in the past 30 days, Bloomberg data show.

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Volkswagen shares halve as funds lose billions

Volkswagen (VW) shares continued their rollercoaster ride today when they nearly halved in value after the German authorities took action to prevent the volatility in the carmaker’s stock from destabilising the German market.

VW briefly became the world’s most valuable company yesterday, worth £238 billion, following panic share buying by hedge fund chiefs.

The hedge funds were trying to cover potential losses after placing huge bets that Volkswagen shares would fall.

But Porsche, the sports car giant, had been secretly building a 74 per cent stake in its rival, the world’s third-largest carmaker. Porsche said this morning that it would take steps to smooth VW’s soaring share price by settling hedging transactions, equivalent to 5 per cent of the company’s stock, but the move has come too late for some of the world’s most aggressive hedge funds, which are facing losses that could amount to between €20 billion (£15.9 billion) and €30 billion.

Today the shares fell €416.9 to €528.09 in morning trade.

Hedge fund experts believe the losses could even bring down some smaller funds, which have been caught out by the sudden price move.

Two days of frantic trading have led to what is thought to be one of the heaviest losses on a single company’s shares taken by hedge funds.

“This is without question the biggest single loss on a single stock in the history of hedge funds. It’s a bloodbath,” Laurie Pinto, a broker at North Square Capital, said.

Other shareholders in VW rounded on Porsche, saying that it had manipulated VW shares in an irresponsible manner. Porsche vehemently rejected the accusation of share-price manipulation.

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Volkswagen shares soar again, up 93 percent


Shares of Volkswagen AG jumped an eye-popping 93 percent on Tuesday after a similar surge the day before. Speculation on the reason centered on hedge funds needing to unwind bad bets on the share’s direction.

The immediate rise in VW share value — at one point, its market capitalization made it more valuable than Exxon Corp. — prompted German regulators to declare they were looking into the reasons for the explosive growth.

The surge came amid reports that hedge funds had been forced to buy scarce shares at high prices after mistakenly betting the shares would fall.

But with Porsche now holding nearly 43 percent of the company, and options to reach 75 percent by next year, that left a shortage of shares. If investors had shorted the stock by selling borrowed shares, they would need to buy shares in order to complete the deal.

On Sunday, Porsche Automobile Holding SE, which owns the company that makes the 911, Cayenne and upcoming Panamera sedan, said it increased its stake in VW to nearly 43 percent plus options, with an eye toward 50 percent by the end of 2008.

That started pushing VW shares into the stratosphere. On Monday, they were up nearly 147 percent to close at 520 euros ($651.35) compared with Friday’s closing price of 210.85 euros ($264.41).

On Tuesday, Wolfsburg-based Volkswagen’s shares spiked as high as 1,005 euros ($1,256) in Frankfurt trading Tuesday, nearly doubling Monday’s close. At that level, Volkswagen was worth some 296 billion euros ($370.8 billion), greater than Exxon’s market cap of $343 billion.

They later settled back to close at 945 euros ($1,183.70) — a gain of 81.7 percent. Some 12.3 million shares traded hands Tuesday.

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Volkswagen: Shares drop sharply; To cut up to 25,000 temp jobs -paper

(For your information only. This is not an investment advice.)

I have been been closely watching Volkswagen shares in the last two weeks.

On Oct. 16 the premium for Volkswagen put options was skyrocketing.

In the past five trading days the VW stock has lost over 42%.

Today’s closing price was € 229,00.

Analyst expectations:

Goldman Sachs Group Inc.: Volkswagen new target price € 90 (Before € 206)
17.10.2008; Source: News (c)

UBS: Volkswagen sell; Volkswagen new target price € 130
20.10.2008; Source: News (c)

Sal. Oppenheim jr. & Cie. KGaA: New Fair value € 90 (Before € 125)
22.10.2008; Source: News (c)


Volkswagen to cut up to 25,000 temp jobs -paper

FRANKFURT, Oct 23 (Reuters) – Volkswagen plans to cut a majority or all of its 25,000 temporary staff as a response to rapidly deteriorating conditions in the market, Germany’s Frankfurter Allgemeine Zeitung reported on Thursday.

“We cannot avoid hard cuts,” Chief Executive Martin Winterkorn was quoted by the paper as saying in front of 500 managers in the company’s hometown of Wolfsburg.

A spokesman for Volkswagen said no decision had yet been taken.

“Both statements are wrong,” he said, referring to the paper’s report that a majority or all 25,000 would go, without commenting further.

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Volkswagen Falls Most Since 1989 on Short-Selling

Oct. 20 (Bloomberg) — Volkswagen AG fell the most in almost two decades, counter to a rising German market, as investors short-sold the shares on speculation that the price will decline once Porsche SE gains control of Europe’s biggest carmaker.

Volkswagen’s common shares fell 80.91 euros, or 23 percent, to 277.09 euros, the biggest decline since at least January 1989. The preferred shares lost 3.85 euros, or 5 percent, to 73.10 euros. Short-sellers borrow stock on expectations they can repurchase the shares later at a lower price.

“VW is completely caught in a short-selling frenzy,” said Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler who recommends selling the stock. “The share price has been detached from reality for at least six months. These erratic moves lack any fundamental explanation.”

Common shares in Volkswagen have surged 78 percent this year, helped by a 27 percent increase on Sept. 18 when investors bought stock to stem losses on their short-selling strategy. The Sept. 15 collapse of Lehman Brothers Holdings Inc., which lent Volkswagen shares to short-sellers, helped trigger the so-called short-squeeze by forcing the original owners of the stock to buy new shares, people familiar with securities lending said earlier this month.

About 15 percent of Wolfsburg, Germany-based Volkswagen’s common shares as of last month were lent, mostly for short-sales, according to London-based research firm Data Explorers. That was the highest proportion of any company on Germany’s 30-member benchmark DAX Index.

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Germany’s Car Industry Crashes

For years, Germany Inc.’s best promotional vehicles have been the world-class luxury cars the country produces. Shiny Audi, BMW and Mercedes-Benz cars are like mobile billboards for excellence, from New York to Moscow, Buenos Aires to Shanghai.

But as the global financial crisis begins to take its toll on the real economy, Germany’s export machine has hit a wall. German exports fell 2.5% in August, the sharpest fall since 2003, as consumers and companies around the world cancel orders for everything from high-end industrial equipment to chemicals.

The car industry, still Germany’s biggest employer, is the worst hit. High gas prices in key markets such as the U.S. have slowed sales for months. Some consumers have been waiting for more fuel-efficient models, while many more are now delaying new purchases because of uncertainty over their jobs. Thanks to the credit crunch, even people who want to buy are finding finance has dried up.

All that spells trouble for the likes of BMW, Mercedes Benz, Porsche, Volkswagen, Ford Europe and General Motors’ Europe arm, Opel. Ferdinand Dudenhoffer, a respected industry analyst, predicts that the number of new German cars delivered to customers in 2008 will fall by at least 100,000 units to around 3.1 million, and will likely slip below three million next year. As a result, he says, German car companies will have to cut up to 20,000 jobs over the coming year.

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