Porsche's Raid on Volkswage
Andreas Hippin:
Bloomberg.com: Oct. 26 (Bloomberg) -- Porsche SE, maker of the 911 sports car, plans to raise its holding in Volkswagen AG to 75 percent next year and outlined steps for reaching that goal in a way meant to reduce the stock's volatility in the past two months. Porsche now owns 42.6 percent of Volkswagen's common stock, has cash-settled options for another 31.5 percent and is sticking to plans to obtain a stake exceeding 50 percent by December, the Stuttgart, Germany-based carmaker said today in a statement. The disclosure is aimed at giving "short-sellers the opportunity to close their positions unhurriedly and without bigger risk."...
"Porsche wants to decide the time and the terms under which it consolidates Volkswagen," said Christoph Berger, 31, a Frankfurt-based fund manager at Cominvest Asset Management. "Today's statement explains to a certain extent the Volkswagen share-price development over the past few weeks. Hedging against options sold to Porsche has probably driven the share price more than fundamental factors." About 15 percent of Volkswagen's common shares as of last month were on loan, mostly for short sales, according to London- based research firm Data Explorers.
Volkswagen shares fell 23 percent, the most in almost two decades, on Oct. 20 as short sellers bet the price will decline once Porsche gains control. A month earlier, the stock rose the most in at least 19 years as market turmoil prompted investors to close short positions.... Short-sellers borrow stock on expectations they can repurchase the shares later at a lower price.... Hedge-fund traders have wagered that the difference between Volkswagen's common shares, which carry voting rights, and its preferred stock, which doesn't, will narrow in favor of the latter. Of 39 analysts covering Volkswagen, 32 have ``sell'' recommendations on the stock. Only one advises investors to buy the shares.... Common stock in Volkswagen... is up 35 percent this year... preferred stock... has dropped 56 percent to 44.24 euros this year....
The German state of Lower Saxony is the second-largest investor in Volkswagen with a stake of more than 20 percent. The Volkswagen supervisory board voted Sept. 12 to retain a company- charter provision giving any shareholder with 20 percent a blocking vote on major decisions, protecting the state's say over the company.
Ah. Memories of the Northern Securities Panic of 1904...
