Speculator vs investor

[Dave A]

Here is an amazing story within a story.

First, there is the story of Porsche gaining a 50% shareholding in Volkswagen.

Frankfurt - The German luxury sports-car maker Porsche has taken over Volkswagen, the biggest European car manufacturer, after purchasing more than 50 percent of VW shares, Porsche said late on Monday.

Porsche said in a brief statement that by buying new VW shares, it "will thus increase its participation to 50.76 percent" of the group's capital, compared with 42 percent before.

Porsche had initially planned to acquire more than 50 percent of VW's stock last year but was forced to delay the operation after the value of the shares soared amid frantic stock market speculation.

At one point, they traded for more than €1,000 per share, making VW briefly the biggest company in the world by stock market valuation.

On Monday, VW shares closed at €254.74, close to the range Porsche had set for itself of between €200-€250.
full story from Business Report here

And then there is this story.

German billionaire Adolf Merckle, assailed by financial turmoil and struggling to salvage his business empire, has killed himself, his family said on Tuesday.

"The desperate situation of his companies caused by the financial crisis, the uncertainties of the last few weeks and his powerlessness to act, have broken the passionate family entrepreneur and he took his own life," a family statement said.

Tragic victim of the credit crunch? Perhaps not.

Merckle was ranked as the world's 94th richest person in 2008 according to Forbes magazine and his family controls a number of German companies including cement maker HeidelbergCement and generic drug company Ratiopharm, but its empire was rocked last year by wrong-way bets made on shares in carmaker Volkswagen.

Banking sources had told Reuters the family lost hundreds of millions of euros on investments, with losses of about €400-million ($539,4-million) on Volkswagen shares alone.
full story from M&G here

With a drop from €1000 to about €250, it takes no rocket science to guess some scalpers must have fried their fingers to a crisp. And Porsche, the true investor, had the patience to wait for the speculators to burn out.

To me the story illustrates the difference between the investor and speculator rather well.