I remember watching this live as it happened, it was fantastic. Reporting requirements of regulated exchanges should make scenarios like these impossible, but Porsche found a loop hole and squeezed the shorts.

Relevant section:

With 12 per cent of the shares outstanding sold short, it was mathematically impossible for every short-seller to buy a share, and therefore close their position.

In other words, half the room were going to be left in a burning building with no way out. A panicked dash for the exit began.

Edit: for context, I was working for a bank at the time, and implemented the procedure that monitored holdings for the limits above/which reporting requirements would be triggered. The rules are quite extensive, and it was an incredible feat to gain control over such a large share of VW stock without violating any of the actual rules.