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Volkswagen short squeeze 2008: the world's priciest stock

In late October 2008, the world was in a financial crisis and car sales were falling. Yet for a few hours, Volkswagen became the most valuable company on Earth. The reason was a short squeeze.

Story · 7-minute read · Updated 2026-10-21

The setup

In 2008, Volkswagen was Europe's biggest carmaker. Its rival, the much smaller Porsche, had been buying VW shares for years.

Many hedge funds thought VW shares were too expensive, especially with a recession coming. So they sold short.

Selling short means you borrow shares, sell them, and hope to buy them back cheaper later. If the price falls, you gain. If it rises, you lose, and there's no top to how far it can rise. See short selling.

Why the shares were scarce

Here's the part many short sellers missed.

• The German state of Lower Saxony owned about 20% of VW and wasn't going to sell.
• Porsche owned a big chunk too, and had quietly built more through options.

So very few shares were actually free to trade. That's called a small share float.

At the same time, a lot of shares had been sold short, by some estimates around 12% or more of the company.

What happened

Sunday 26 October 2008

On a Sunday, Porsche made an announcement. It said it now controlled 74.1% of VW ordinary shares:

• 42.6% owned outright.
• 31.5% through cash-settled options.

It also said it planned to go to 75%.

Do the math. Porsche had about 74%. Lower Saxony had about 20%. That left only around 6% of shares for everyone else.

But short sellers needed to buy back more than that. There weren't enough shares in the market for all of them to close.

Monday and Tuesday

On Friday 24 October, VW had closed at about €211.

When trading opened on Monday, short sellers rushed to buy. Every buyer pushed the price higher. Every higher price hurt the remaining short sellers more, so they rushed to buy too.

That loop is a short squeeze.

The moment everyone remembers

On Tuesday 28 October 2008, VW shares traded above €1,000.

For a short time, that made Volkswagen the most valuable listed company in the world, bigger than giants like ExxonMobil, in the middle of a global crash.

The next day, Porsche said it would release up to 5% of its options to ease the shortage. The price fell back quickly.

Short sellers were reported to have lost many billions of euros.

What came after

The story didn't end well for Porsche either. It had borrowed heavily to build its stake. As the financial crisis deepened, that debt became a problem. In the following years, Volkswagen ended up taking over Porsche's car business instead.

Hedge funds sued Porsche in Germany and the US, saying it had hidden its plans. Courts repeatedly dismissed those claims.

Prosecutors also charged Porsche's former CEO and CFO with market manipulation. A Stuttgart court acquitted them both in March 2016.

Some academics still argue the squeeze amounted to manipulation. The courts did not agree.

What it teaches

1. When you're short, your possible loss has no ceiling

A stock you buy can only fall to zero. A stock you short can rise and rise. That's why a stop and a small size matter even more on short trades. Read how to set a stop-loss.

2. Look at who owns the shares

The price looked too high. The short sellers may even have been right about the business. What they missed was the supply. With few free shares, being "right" didn't matter. Check short interest and float before betting against a stock.

3. A gap can skip your stop

The biggest jump came over a weekend. On Monday, the price opened far above Friday's close. A stop order can't fill at a price the market never traded. Our gap trading guide explains why.

4. Size from the stop, then expect worse

Work out your size with the position size calculator. Then ask what happens if the price gaps past your stop. If that number is too big, trade smaller.

What it doesn't mean

• It doesn't mean short selling is wrong. Short sellers help find overpriced and sometimes fraudulent companies. It means shorting has a different risk shape.
• It doesn't mean every high short interest stock will squeeze. Most don't. VW was rare because the free float was tiny.
• It doesn't mean you should chase squeezes. The price fell back fast. Anyone buying near the top took the other side of the panic. Compare it with the GameStop squeeze.
• It doesn't mean someone was found guilty. The courts acquitted Porsche's former leaders and dismissed the civil claims.

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