German billionaire Adolf Merckle in Germany on April 26, 2004
Wayne P. Weddington III
Author and hedge fund manager
Last week, Adolf Merckle threw himself in front of a train.
Merckle committed suicide on Tuesday January 6 2009 in the face of a crumbling financial situation. The German billionaire’s speculation in Volkswagen stock pushed his business empire to the edge of ruin. Last Fall, Mr. Merckle lost hundreds of millions of euros in a speculative battle with Porsche, the sports car manufacturer, to seize control of Volkswagen. Mr. Merckle had lost a sizable bet that shares in Volkswagen would fall, in a financial transaction known as short-selling. The loss of “the low hundreds of millions” does not seem a huge loss compared to an estimated net worth of $9.2 billion (Forbes 2008). But the agony of defeat at the hands of one of the decade’s most aggressive short squeezes proved too much to bear for Merckle. He eventually took his own life.
I am not making light of Merckle’s suicide. As pointed out by Douglas Faneuil on The Huffington Post “though often characterized as the result of some life event, [suicide] is nearly always caused by an underlying mental disorder… 90-95% of those who kill themselves exhibit clear and commons signs of mental illness well before their lives end. Certain tragedies… may trigger an acute depression, which can lead to suicide, but nearly all victims of suicide have… illness.”
Yet the event stands a macabre illustration to the perils of short selling – the short squeeze.
Editor's note: Wayne Weddington is a partner at Brunswick Capital Partners and author of "Do-It-Yourself Hedge Funds: Everything You Need to Make Millions Right Now," Grand Central Publishing
Filed under: 360° Radar • Economy • Global 360° • Wayne P. Weddington III