August 21st, 2009
06:03 PM GMT
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Last Friday, when it was announced that Volkswagen had agreed a takeover of Porsche, with a little help of money from Qatar, it seemed that this saga was nearing the end. No so.

After German prosecutors raided to Porsche offices in Stuttgart on Thursday looking for evidence of “market manipulation” and a violation of “disclosure rules” the whole thing now looks set to run and run.

So, what are they looking for? You may recall Volkswagen shares soared last October when the much smaller Porsche announced it had bought a majority stake, catching everyone off guard.

Many people in the markets had “shorted” the stock (basically a bet the shares would fall) and had to quickly try to buy shares, even as the price took off, in order to cover their exposure. Then, almost as quickly, the shares fell hard.

German stock market rules stipulate how many shares an entity can purchase (percentage wise) of another company before having to disclose that position to regulators. But apparently the same rule does not apply when it comes to share options (an option to buy shares at a certain price).

Porsche had built up a huge number of options, to the surprise of the market, and apparently to regulators.

No matter how this investigation plays out, some in Germany hope there will be a change in the law to cover options, to limit the chances of this happening again.

Of course, the Porsche position did not work. Volkswagen is going to gobble up the premium car maker.

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Filed under: Auto industry

August 21st, 2009
05:02 PM GMT
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LONDON, England - Wherever you live, there’s always a local oddity or two: uniquely strange driving habits on the roads, maybe, or fast-selling products whose actual use is obscure. Here in England, it’s the strange phenomenon of the fiver famine.

The fiver, let me explain, is our smallest banknote, both in size and value: the five pound note. You would have thought they’d be common – not exactly two-a-penny, but fairly easy to find.

Er … no. The fiver is a rare bird which only occasionally flits across one’s path in its gray-green plumage, whereas its plumper companion, the £10 note or tenner, a classic brown job, flies out of cash dispensers with great regularity.

And here’s the second oddity: when your patience pays off and you do track the rare fiver bird down, it’s usually in a sorry bedraggled state.

People here were quick to embrace credit cards and then debit cards, and the old-fashioned cheque is still around in the background, no doubt still recovering from the excitement of its 350th birthday party earlier this year.

But the shortage of handy fivers is a nuisance for people who are forced to use a lot of cash, like market traders and taxi drivers. I’m not saying they’d change a tenner for a fiver just to make life more convenient, but they dislike having to give their customers a clunking great pile of our weighty little £1 coins rather than a handy banknote.

Talk to the Bank of England or the Payments Council, which monitors all kinds of payment on behalf of retailers, and they look in all directions and usher you into a private room before revealing a dirty secret about us Brits: we abuse our banknotes.

I’m serious. Those big denominations get treated with respect, of course: the average £50 notes can look forward to a decade of pampered life, lovingly tucked into fat wallets or squirreled carefully away in safes. By contrast, a tenner might last only a year or two, while the unfortunate fiver is treated as small change and handled accordingly: scrumpled up into a ball, stuffed into pockets next to bunches of keys, put through the washing machine, and generally viewed with scant respect.

So as fast as the Bank of England issues nice fresh notes, they’re soon transformed into limp dog-eared little rags that are simply not crisp enough to put through the machinery that counts banknotes. That means they have to be weeded out, and banks generally prefer to save themselves the trouble and cost involved.

That means fivers aren’t available from cash dispensers (with exceptions; I was intrigued to be issued with £5 notes when withdrawing money on a recent visit to Liverpool). Given that nearly two-thirds of the cash withdrawn in the UK comes out of those holes in the wall, the result is a shortage.

Just to tighten the vicious circle, retailers generally don’t even bother to bank the fivers they accumulate. So even if the banks could put them into cash dispensers, they’d be short of them anyway.

So while it’s tempting to think that this is all down to the recession here and our wanting to spend less and take out smaller denomination banknotes, it’s really all about printing more of the kind of money we like to use most.

Now the retail banks and the Bank of England are working together to address that. For a couple of months now they have been running a pilot centred on Central and Southwest England.

It’s too early to say whether this will mean more fivers everywhere; I personally fear a lot of banknote printing machines will burn out as the Bank of England tries to cope with the fiver famine and the need to pump cash into the financial system.

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Filed under: BusinessMoney

August 21st, 2009
01:17 PM GMT
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August 21st, 2009
01:15 PM GMT
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