As GameStop plunges, Volkswagen’s 2008 short squeeze gives an idea of how painful it will get

Volkswagen often comes to mind when investors try to find a short squeeze comparable to GameStop‘s jaw-dropping spike last week.

In October 2008, the German carmaker saw its Frankfurt-listed shares more than quadruple in two days, briefly becoming the biggest company in the world.

The rally was initially triggered by a surprise announcement that Porsche had boosted its VW stake, which sent a slew of short-selling hedge funds rushing for the exit.

Last week, shares of the brick-and-mortar video game retailer soared 400% in wild trading as a band of retail traders, who…