It's Official: Porsche Is Not a Car Company


The New York Times has an article today about how Porsche (12,000 employees) is taking over Volkswagen (324,000 employees).  How is this possible?  One big reason is that I'd argue that Porsche is no longer a car company.  Read the following from the above article:

In the meantime, Porsche's investment in VW has become a huge bonanza.  In its results for fiscal 2006-7, Porsche said it earned 5.85 billion Euros ($8.6 billion) in pretax profit, with 3.6 billion Euros ($5.3 billion) of that coming from gains on stock-option transactions.

In other words, Porsche is a hedge fund that's gone way long on one stock - Volkswagen.  What's more, here's VW's stock price for the last year:

Note the fairly steady rise-my bet is that Porsche has been making money rolling over their options (duh - $5.3 billion worth).  They may have even set a weird ball in motion: the market expects a takeover at a premium, so they bid up the stock - which makes Porsche more money on its options - which in turn leads the market to expect a higher takeover price as Porsche has more cash.  Maybe the party stopped on the 1st of November when investors realized that there weren't any fundamentals driving this rise.

In other unrelated news, I visited the Porsche Museum in Zuffenhausen years ago.  Check out what they did to this Carrera (criminal!):


Wednesday, November 28, 2007

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