Volkswagen shares nearly halved in early trading on Wednesday after main shareholder Porsche moved to ease a squeeze on short sellers that more than quadrupled the stock in days.
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For a time on Tuesday VW’s voting stock was worth EUR296bn (US$370bn), or more than the $343bn market capitalisation of oil giant Exxon Mobil, according to Reuters.
Porsche’s weekend announcement it had indirect control of 74.1% of VW, leaving less than 6% in the market and prompting a short covering rush that vaulted VW’s market value to EUR278bn ($348bn) and its shares to a record close of EUR945 on Tuesday, compared with its weekend close at EUR210.85, Reuters said.
But the stock fell as low as EUR491 in early Frankfurt trading on Wednesday, the news agency said.
The report said short sellers who rushed to close their positions after Porsche’s announcement on Sunday were paying virtually any price to get their hands on the few remaining shares, even though Porsche insisted its announcement would allow short sellers to unwind their positions “without haste and without greater risk”.
“We vehemently reject the accusation of share price manipulation,” a Porsche spokesman told Reuters earlier. “The ones responsible are those that speculated with huge sums of money on a falling Volkswagen share price.”
Porsche said in a statement: “Porsche Automobil Holding SE has information that speculative short sellers have had to buy Volkswagen ordinary shares in order to fulfil their delivery obligations. In the very recent past, this resulted in a massive increase in the stock exchange price of the Volkswagen shares, which at one stage exceeded EUR1,000 per Volkswagen ordinary share.
“In order to avoid further market distortions and the resulting consequences for those involved, Porsche SE intends – depending on the state of the market – to settle hedging transactions in the amount of up to 5% of the Volkswagen ordinary shares. This may result in an increase in the liquidity of the Volkswagen ordinary shares.
“Porsche SE denies all responsibility for these market distortions and for the resulting risks to which the short sellers have exposed themselves. Porsche wishes to point out that the applicable capital markets law provisions have been complied with at all times. Porsche has not been active in the market during this share price movements. Allegations of price manipulation by Porsche are therefore without any foundation whatsoever.
“Porsche remains committed to its goal of increasing its stake in Volkswagen to up to 75% and thus intends to continue to acquire Volkswagen ordinary shares, on and off the stock exchange, at prices which are economically justifiable.”
The German Federal Agency for Financial Services Supervision (BaFin) was informed by Porsche in advance about the measure being contemplated and its publication, the automaker added.
The BBC’s business editor explains what happened
