Volkswagen Short Squeeze
Posted By Eloise Posted On Comment (16)

Volkswagen TANKED FOR FIVE DAYS before the Great Short Squeeze in 2008

A WallStreetBets user recently posted the following picture and caption: Volkswagen stock TANKED FOR FIVE DAYS before the Great Short Squeeze in 2008

Source: WallStreetBets

As the picture shows, Volkswagen rose rapidly from September 2008, peaking right under a $200 billion market cap. However, four days before the remarkable Volkswagen short squeeze, the stock tanked for four consecutive days. After the bottom, the stock rocketed over 4x, close to a $400 billion valuation.

During the great Volkswagen squeeze, the company ended up becoming the largest company in the world. Given that we have trillion dollar tech companies these days, it is unlikely GameStop will become the largest company in the world. But if the stock chart replicates what Volkswagen did, it is entirely possible the stock could be valued close to $700 billion.

But investors and speculators alike should be warry. A “classic” short squeeze usually involves a rapid rise in a price of a stock and then a dramatic fall as everyone tries to liquidate their gains.

Volkswagen Short Squeeze
GameStop Price Chart

Based on the above chart, it does appear as if the short squeeze may have already happened. So what happened to Volkswagen to shoot the stock price up 400%?

Well first it was an event driven squeeze. In 2008 Volkswagen announced that Porsche increased their stake in the company. According to Autoweek:

“In 2008, Porsche gobbled up so much Volkswagen’s stock it caused VW’s stock prices to soar, which similarly caused short sellers to lose tens of billions of dollars in a span of a couple days.” – Autoweek

Could something similar happen with GameStop? Maybe. There are a ton of billionaires (including Mark Cuban) who are rooting for the retail investor to win the battle against the suits. A surprise investment by someone like Mark Cuban or Elon Musk, could send the stock into the stratosphere.

Should you count on it? Probably not. But when there is hope there will be an extended valuation. Only time will tell if the short squeeze has happened or not.

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