Hedgies dial 911

Porsche 911, that is.

Apparently, Volkswagen — being a crappy company — has been a favorite hedge fund short for a long time.  And Porsche has been trying to take them over, and…  Well, it’s a long story that I cannot be bothered to read much less repeat.  But the bottom line is that Porsche suddenly announced yesterday that it held call options representing 75% ownership of the company.

“The disclosure should give so-called short sellers… the opportunity to settle their relevant positions without rush and without facing major risks.”

Oh?

Volkswagen stock briefly spiked by a factor of five,  making it momentarily the largest company in the world by market cap.  Bigger than Wal-Mart; bigger than Exxon-Mobil.  Sure, why not.

Rumor has it that Goldman Sachs and Morgan Stanley were on the wrong side of this trade.

Shares of Morgan Stanley and Goldman Sachs Group Inc tumbled on Tuesday on speculation the banks might be caught on the wrong side of a trade involving German automaker Volkswagen AG, traders said.

Morgan Stanley shares were down $1.67, or 12 percent, at $12.06 after falling as low as $10.15. Goldman slid $5.98, or 6.3 percent, to $87.01, after dropping as low as $82.24.

GS’s official response is “no comment” and MS’s official response is “bullsh*t”.  I am paraphrasing slightly.