Preferred shares of Porsche SE fell early on Monday as news broke that Volkswagen had stopped merger talks.

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The share slump came as the market feared the automotive holding group’s finances may be worse than believed, poisoning its attempts to forge closer ties with cash-rich affiliate Volkswagen, Reuters reported.


Despite a healthy sports car business that the holding company says still earns enough to make interest payments on EUR9bn (US$12.19bn) in net debt, the listed parent is sounding out German state bank KfW about a EUR1bn loan, Reuters cited Der Spiegel magazine as saying.


Porsche said only: “We do not name the banks with whom we negotiate.”


Porsche SE’s non-voting stock fell as much as 9.3% and was down 3.8% at EUR39.70 euros at 0916 GMT. By publication time, the shares were trading at EUR41.05, according to ft.com

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VW said on Sunday merger talks were off the table as long as Porsche did not reveal all the facts surrounding its financial situation and plans to reduce its debt.


“We must get a clear idea of the true state of affairs at Porsche. We need absolute transparency with regard to the present situation,” Volkswagen chief executive Martin Winterkorn wrote in an letter to staff cited by Reuters.


“It is in the interest of all concerned, our employeees, all shareholders and our customers to ensure there is no threat to Volkswagen’s financial stability and autonomy.”


Porsche said only the meeting on Monday was cancelled, and that talks to create an integrated automotive group would go on, the report added.