I believe (from bisection) that this was introduced in the transition to
C at 3604242f080.
I've attached a repro (against master). At the time the bug was
introduced, the output in question went to stdout instead of stderr, so
the attached test case will not quite work on the older version. But if
you run under -v, you'll be able to see the bad ("foo/foo/sub" instead
of "foo/sub" or just "sub") output.
diff --git a/t/t7406-submodule-update.sh b/t/t7406-submodule-update.sh
index 64f322c..e1deb17 100755
--- a/t/t7406-submodule-update.sh
+++ b/t/t7406-submodule-update.sh
@@ -140,6 +140,23 @@ test_expect_success 'submodule update --init --recursive from subdirectory' '
test_i18ncmp expect2 actual2
'
+cat <<EOF >expect2
+Submodule 'foo/sub' (/home/novalis/twosigma/git/t/trash directory.t7406-submodule-update/withsubs/../rebasing) registered for path 'foo/sub'
+EOF
+
+test_expect_success 'submodule update --init from and of subdirectory' '
+ git init withsubs &&
+ (cd withsubs &&
+ mkdir foo &&
+ git submodule add "$(pwd)/../rebasing" foo/sub &&
+ (cd foo &&
+ git submodule deinit -f sub &&
+ git submodule update --init sub 2>../../actual2
+ )
+ ) &&
+ test_i18ncmp expect2 actual2
+'
+
apos="'";
test_expect_success 'submodule update does not fetch already present commits' '
(cd submodule &&