Ongoing saga at carmaker Porsche

Here's another interesting story about risk and reward.

Starting back in 2005, carmaker Porsche started purchasing shares of VW. It currently owns a majority (>50%) of the company directly by shares. They also controlled additional shares with options. Speculators had been betting that the shares of VW would go down. Once the news got out about how much Porsche owned, there was a squeeze because of the following:

• Porsche shares + Porsche controlled via options + Shares short by speculators was greater than outstanding shares of VW.

I can't find the articles, but it was one of the first times where profits exceeded operating revenue (sales from Porsche cars). Comments at that time were that Porsche had turned into a hedge firm. This was all because of the large VW position.

• Click here for the TimesOnline article in March, 2009 reporting Porsche profits.

Now it appears that risk is starting to catch up to Porsche and they are looking for a bailout via either a merger with VW or loan/investment from a Qatar investment company.

• Click here for the Yahoo! Finance article.

Another risk and reward issue. Porsche received a huge reported reward earlier this year, but now may suffer some risk. We'll have to see how the reporting profits go in the next few quarters.