By releasing some of its options to the market, Porsche sent Volkswagen shares plummeting on Wednesday from their over-inflated heights. But the luxury carmaker now also has to counter suspicions of manipulation.
VW shares gained 240 percent in 2 days -- now they're coming back to earth
What goes up must come down -- that was the motto of Porsche's share liquidity initiative on the German stock exchange, the DAX, on Wednesday, Oct. 29.
Porsche's willingness to make VW stocks available to investors immediately caused prices, which had zoomed up to over 1,000 euros ($1,250) on Tuesday, to tumble. By midday, VW shares had lost 38 percent, having fallen from their opening level of 945 euros to 588.
Porsche representatives said the action was necessary to restore a measure of stability to VW share prices. And they denied that their company was profiting from the rollercoaster ride.
"We want to ensure that prices return to a sensible level," a Porsche spokesman told the online portal of the German financial periodical Manager-Magazin. "We don't want to cash in on VW. Calming things down is what's in our interest."
Ironically, the action became necessary precisely because Porsche ambitions vis-a-vis VW had created an emergency shortage of the latter carmaker's stock.
Larger goal remains
Porsche says it still intends to move in on VW
VW share prices skyrocketed because investors underestimated the extent to which Porsche had acquired Volkswagen stocks and options.
Last weekend, Porsche announced that it controlled 74 percent of VW shares. That left speculators who had sold the stock short or borrowed it in a position of having to buy whatever shares were available at vastly inflated prices.
By law, the German state of Lower Saxony where Volkswagen's headquarters are located owns 20.1 percent of company's shares.
Porsche's decision on Wednesday to cancel up to five percent of its guarantees dramatically improves VW share availability, but it does not represent a fundamental change in Porsche strategy.
Porsche reaffirmed on Wednesday its intention to acquire up to 75 percent of VW stock, either on exchange markets or by other means.
Porsche's own stock was up by around 10 percent at midday on Wednesday.