Remember the Volkswagen fruit machine?
Well, the situation developing at Hermes International, following the daring market raid by the Wolf in the cashmere coat, bears something of a resemblance to the short squeeze that developed in the German carmaker two years ago.
Here’s why.
Once the LVMH takes delivery of its 17 per cent stake, the free float of Hermes will drop to around 8 per cent. To put that figure in perspective the short position in Hermes International is reckoned to be around 7 per cent, according to traders.
Add into the mix the possibility that the call options used by LVMH to buy around 6 per cent of Hermes were not fully hedged and everything is in place for a big squeeze higher.
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Meanwhile, LVMH has issued a statement about its stake building activities in Hermes. And everything has been done everything to the letter of the law.
Following its announcement on Saturday 23 October concerning the holding in Hermes International, LVMH confirms that it is fully compliant with French stock exchange regulations, notably those concerning the disclosure requirements on crossing shareholding thresholds. LVMH will file the appropriate notifications within the timeframe laid down by the French markets regulator, the AMF (L’Autorité des marches financiers).
Related links:
LVMH bags €1.45bn stake in Hermès – FT
LVMH/Hermés – FT
LVMH could not resist attraction to Hermès – FT