Volkswagen shares soar over two days
Tuesday October 28, 7:28 pm ET
By George Frey, AP Business Writer

Volkswagen shares soar 82 percent in second day of huge gains; German regulator investigating

FRANKFURT, Germany (AP) -- Shares of Volkswagen AG jumped an eye-popping 82 percent on Tuesday after a similar surge the day before, leading German financial regulators to say they would investigate.

Speculation on the reason for the rise centered on a reduced number of shares available and on hedge funds needing to unwind bad bets on the share's direction. The surge came amid reports that big investors had been forced to buy scarce shares to get out of mistaken bets the shares would fall.

On Sunday, Porsche Automobile Holding SE, which owns the company that makes the 911 and Cayenne vehicles, said it increased its stake in VW to 42.6 percent plus enough options to give it 74.1 percent. Since the German state of Lower Saxony, where Volkswagen's headquarters is based, holds just over 20 percent of the company's shares, as little as 6 or 7 percent would be freely available.

That started pushing VW shares sharply higher. On Monday, they were up nearly 147 percent to close at 520 euros ($651.35) compared with Friday's closing price of 210.85 euros ($264.41).

On Tuesday, Wolfsburg-based Volkswagen's shares spiked as high as 1,005 euros ($1,256) in Frankfurt trading Tuesday, nearly doubling Monday's close. At that level, Volkswagen was worth some 296 billion euros ($370.8 billion), greater than Exxon Mobil Corp.'s market cap of $343 billion.

They later settled back to close at 945 euros ($1,183.70) -- a gain of 81.7 percent. Some 12.3 million shares traded hands Tuesday.

German financial markets regulator BaFin said it was looking into the recent history of Volkswagen share trading to see if there has been any market manipulation or insider trading.

"Since September the Volkswagen share has gone up and down dramatically," Anja Engelland, a spokeswoman, said. "We're looking at the trading, the history of the shares."

Torsten Baar, a spokesman for Frankfurt exchange operator Deutsche Boerse AG, said the Volkswagen stock would remain in trade as long as it still has a free float of 5 percent.

"Yesterday, VW has almost doubled its market capitalization," said Oliver Roth, the director of equities trading at Close Brothers Seydler AG on Frankfurt exchange floor. "That's crazy; they should stop trading that share."

Ulrich Horstmann, an analyst with Bayerische Landesbank, did not believe the rapid surge could continue. He said Volkswagen shares would most likely fall in the next months because the fair value on Volkswagen is really closer to 150 euros ($187.50).

http://biz.yahoo.com/ap/081028/eu_ge...



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