Since the beginning of the year, the Volkswagen Group has been the only player of its industry to register a substantial increase in the market capitalization. After all during past weeks Volkswagen experienced an inverse trend compared to the market, with daily fluctuations of up to 50%. The reason behind such events was Porsche's intention to increase its shareholding within the Group.
On the 27th of October, Volkswagen shares registered a phenomenal increase (+146,62%) reaching 520 euros per share. The following day, the German car maker became for moments first worldwide in terms of market capitalization. In fact, the Group's shares continuously rose throughout the whole trading day recording an increase of 93%, at 1005 euros.
It must be noted that the reasons behind such fluctuations weren't though linked with stock exchange speculations. Soon after Lehman Brothers declared bankruptcy in September, ignites a wave of short selling. Considering that Porsche announced that it owns, among shares and options, 74,1% of Volkswagen's shareholding and that the State of Lower Saxony owns 20,1%, it means that the free-float amounts to just 5%. As a consequence, as investors firmly believed that a share price of 200 euros was already highly overvalued, starting therefore a short-selling wave, found themselves having to cover numerous short positions.
During the day, the biggest names among investment banks, such as Goldman Sachs, Morgan Stanley and SocGen, reported sharp drops in share prices mainly due to this unpredicted announcement by Porsche.
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