What's up guys and welcome back to wall street millennial today, we're covering the epic rise and fall of german entrepreneur and investor adolf merkel. He made his initial fortune by creating the giant german pharmaceutical company, phoenix pharma, handle and later diversified into other industries at his peak. In 2007, he was worth 12.8 billion dollars and was the 36th richest man in the world to fuel. His growth merkel took on billions of dollars of business and personal debt.

He also took on extremely risky investments in 2008. His companies were hit hard by the global financial crisis and subsequent recession. The business empire he spent decades building came crumbling down before his very eyes. In 2009, his net worth had fallen from a high of 12.8 billion dollars down to almost nothing unable to handle the loss.

He tragically jumped in front of a train to end his suffering on his own terms. In this video we'll go over how merkel built his business empire and how it all came crumbling down. In 1934, adolf merkel was born to a wealthy family in dresden, germany, at a young age. He took over his grandfather's chemical wholesale business and turned it into a pharmaceutical wholesaler called phoenix pharma handle.

He had incredible success with the business and phoenix grew to have a dominant market position within germany. He leveraged his expertise in the pharmaceutical industry to create germany's first. Generic drug manufacturer ratio farm, which was also a huge success by the late 90s, his pharmaceutical empire, made him a billionaire. He lived in a mansion in central germany, with his wife and four kids, but adolf had even greater ambitions.

He wanted to diversify his business empire into even more industries and become even richer. To this end, he started an investment company called vem group which invested his vast wealth into various businesses. One of vem's, most significant investments, was a multi-billion dollar stake in heidelberg cement, a german-based international building materials company. In the beginning, this seemed to be a great investment during the global real estate boom of the early 2000s.

There was massive demand for cement for construction of new real estate projects. This caused heidelberg's revenues and profits to explode, and the stock price increased five-fold from 2003 to 2007. to take further advantage of the booming cement industry. Heidelberg acquired the british cement company hanson plc for 8 billion pounds or roughly 15 billion dollars.

This combined entity became the second largest cement company in the world to finance the deal merkel's company vem borrowed money from banks using its own shares in heidelberg as collateral. This gave vem an extremely leveraged position. If the real estate market continued to boom, the company would have tremendous upside from its economies of scale. However, if the market went, south vem can be put in a position where it's unable to pay its debts in 2008.

Just one year after heidelberg's debt finance acquisition of hanson lehman brothers collapsed, triggering the great financial crisis, millions of people lost their homes and real estate prices, taint real estate development projects, grounds to a near hall, causing demand for cement to plummet from 2008 till 2009. Heidelberg stocked nosedive almost 80 percent as their revenue and profits dried up. This was very bad for vam. They had borrowed money against the value of their shares in heidelberg when the value plummeted.

The banks gave him a margin call if he wanted to keep vam afloat. Merkel needs to come up with billions of dollars of cash in the matter of just a few months. To do this, he sold his entire stake in heidelberg, as well as his pharmaceutical company ratio farm. However, the financial crisis caused the value of these assets to be depressed.

They were not enough to cover his margin, call to save vm from insolvency. He offered up his own private assets as collateral. He was putting everything he had on the line. The loss of heidelberg wiped out the majority of his net worth, but he still had a few hundred million euros left, while merkel was still incredibly rich by most people's standards.

He wanted to reclaim his billionaire status. He decided he would put all of his remaining chips on the table in a final gamble to make back his fortune with the amount of money that he was betting. A regular casino wouldn't cut it. So he turned to the world's biggest casino.

The stock market merkel started doing due diligence on stocks, focusing mainly on german companies, as this was his area of expertise, merkel thought of an investment that could profit off of the very recession which cost him his fortune in the first place in 2008, unemployment was on The rise across the globe and people's discretionary income was falling rapidly. Auto sales were plummeting, as people didn't have money to buy new cars and banks were tightening up their financing standards. On his extensive analysis, he decided that he would short volkswagen stock. This seemed like a foolproof idea with the headwinds facing the auto industry.

Vw's business would surely tank bringing its share price down with it. However, shortly after merkel made the position, vw stock went to the moon. It 5x in value in what eventually came to be called the infinity squeeze. Volkswagen was a popular stock for short sellers, as the fundamentals of the business were deteriorating, but the stock price remained stubbornly high as it turned out.

The share price was being supported by porsche, who was secretly buying up shares in vw, in a bid to eventually acquire the company in october of 2008 force shocked the investing world when it announced that it had built up a 74 stake in volkswagen. An additional 20 of the stock was owned by the german state of saxony, leaving the free float of the company very low. When this was announced, all the short sellers immediately rushed to cover their positions, causing a massive short squeeze. This pushed vw's market cap up to 400 million dollars briefly surpassing exxon mobil to become the most valuable company in the world and again it's all down to volkswagen.

What is going on here is unbelievable. The share it nearly doubled this morning it reached a level of 1005 euros, and already yesterday the car maker rose 147, causing the ducks to stay in positive territory when the rest of europe was declining. What is really going on here is very hard to say. It must be the worst case scenario short squeeze.

One can in fact imagine - and it's it's all about porsche, saying over the weekend - that they hold 42.6 percent in volkswagen currently and another 31.5 via option. So indirectly, porsha holds nearly 75 the federal state of laura saxey. They hold another 20.2, so just over 20 so effectively, there's only a tiny free fold left of just under six percent five point: seven percent - and if everybody is short in a share with such tiny free float. If those two things come together, then that can cause these severe disruptions that we're seeing again today or is one analyst he put it.

Each and every short seller in the world is trying to close up their positions and there's no way they can do it, except for trying to buy like mad. So so it's among investors, many had bet on vw, share price to fall. So the shares recent move. It's all down to covering of short positions rather than any fundamentals, because they don't look as good as you might suggest, when looking at the share price - and that is having also a severe effect on the other members of the ducks, such as the india index heavyweights.

Aliyan siemens eon because index uh tracking funds. They are selli they're selling the 29 other companies listed index to catch up with volkswagen, and it's a big embarrassment in fact, for the german market yep. They need to get it done. They need to get it sorted.

They need to figure out a way of doing this. We made a video explaining the volkswagen short squeeze in greater detail. The link is in the description below when the squeeze happened. Merkel was forced to cover the position at the highs, although the exact size of his position is undisclosed, it is estimated that he lost hundreds of millions of euros on the trade.

This single law swiped out, almost all the net worth he had remaining by this point. He had finally lost everything. A few months later, in january, of 2009 merkel finally had had enough. He jumped in front of a train near his hometown, leaving behind his wife and four kids.

The story of adolf merkel is a tragic and sobering tale. He was a great businessman and investor having created two multi-billion dollar pharmaceutical companies, almost all of the investment disasters we cover on this channel have one thing: in common: excessive financial leverage merkel stretches financial firepower too thin, making him extremely vulnerable when the market finally moved against Him alright guys that wraps it up for this video. What do you think about adolf merkel's investments? Let us know in the comments section below if you enjoyed this content, don't forget to like subscribe and share. As always.

Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.