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Herbalife Ltd. Message Board

  • tlee22202 tlee22202 Dec 23, 2012 9:10 AM Flag

    The casualty of the Volkswagen short squeeze

    In 2008, German billionaire Adolf Merckle lost around one billion from a short position in Volkswagen.

    The stock went from 200 Euros to over 1,000 Euros in a short squeeze panic of only two trading sessions after Porsche announced they were accumulating shares.

    Merckle had been worth over 9 billion. However, the loss from the short squeeze led to margin calls from other creditors and threatened to unravel his entire private business empire.

    He became so distraught over this that he killed himself by jumping in front of a train.

    Now I am not saying that such a short squeeze would ever occur again, but what if someone just happened to be short 20 million shares of HLF? The share price would only have to rise by $50 to generate a loss of one billion. Volkswagen shares had increased by 400% during the short squeeze. HLF would only have to increase by 200% to 77 to generate this loss. This would not be an unreasonable target price for even a minor short squeeze considering the high for 2012 was 73.

    Sentiment: Buy

 
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