perpetualbull

Volkswagen Saga: Major Short Squeeze

There was a major factor here that went largely unreported. Stock brokerages (and mutual funds) routinely lend shares to investment banks in what are called securities lending transactions. Many European brokerages had loaned Volkswagen stock to Lehman Brothers. In these situations, the brokerage is missing shares but fully expects the borrower (Lehman) to return them later. However, Lehman collapsed, meaning those brokerages were suddenly left without their shares. They had to buy new shares to replace the ones they stupidly loaned to Lehman, therefore causing intense buying pressure