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  • Christian Armbruester

Technoking Meets The Widowmaker

When infamy meets destiny in the trade of the decade.

I never understood why the classic cold war movie K-19 The Widowmaker (2002) received such poor reviews. Maybe it was the bad accents, and of course given the title, it is not as if we could expect anything uplifting to occur here. Such as it is also when it comes to Volkswagen. You see in the world of trading, and as a matter of pure speculation, this stock has been known to kill people. Literally, and it all started in 1998.

Back then, trading the ordinary and preferred shares of Volkswagen back and forth was a tried and proven way to make money. After all, there are two different securities, but the company is the same, so how far can they really move apart? Turns out, quite a bit when the biggest and most renowned hedge fund in the world started to get involved. Not satisfied with leveraging the shares, they also piled in on the options and wouldn’t you know it, that created some waves in the sleepy backwaters of global trading that was Frankfurt in those days. By the time the locals were done squeezing the spread, the place where genius failed was said to have lost $1.3bn, which back then was a lot of money and ended quite a few careers, rather unsurprisingly.

The next chapter in our story occurred 10 years later. It was like David and Goliath, when Porsche tried to buy Volkswagen. We all had a good laugh when it was first announced, but fairly soon the spreads started to widen to levels we had never seen before. That was because the ordinary shares had the voting rights, and all of a sudden became worth much more than the preferred. It was as epic as it was fast, and Volkswagen would rise in price so far that it briefly became the most valuable company on the planet. Everyone went short, and most got it wrong. It is said that two people committed suicide and quite a few lost entire fortunes, whilst most others (including myself) swore never to go near the stock ever again.

It is now more than another decade later that Volkswagen once again is shining in the spotlight. Long standing in the shadow of the more good-looking upstart dabbling in new ways of vehicular propulsion, the stock has underperformed Tesla by some 1000% in the last two years. However, at long last the share price is on the rise. Already producing nearly as many electric cars as Tesla, news has broken that Volkswagen is about to get into batteries. By all technical and fundamental measures, the people’s car company is still massively undervalued versus the self-proclaimed king of techno. Surely, that spread is too wide so as not to revert, and go wrong again in the worst trilogy, ever?


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