Oct. 20 (Bloomberg) — Volkswagen AG fell the most in almost two decades, counter to a rising German market, as investors short-sold the shares on speculation that the price will decline once Porsche SE gains control of Europe’s biggest carmaker.
Volkswagen’s common shares fell 80.91 euros, or 23 percent, to 277.09 euros, the biggest decline since at least January 1989. The preferred shares lost 3.85 euros, or 5 percent, to 73.10 euros. Short-sellers borrow stock on expectations they can repurchase the shares later at a lower price.
“VW is completely caught in a short-selling frenzy,” said Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler who recommends selling the stock. “The share price has been detached from reality for at least six months. These erratic moves lack any fundamental explanation.”
Common shares in Volkswagen have surged 78 percent this year, helped by a 27 percent increase on Sept. 18 when investors bought stock to stem losses on their short-selling strategy. The Sept. 15 collapse of Lehman Brothers Holdings Inc., which lent Volkswagen shares to short-sellers, helped trigger the so-called short-squeeze by forcing the original owners of the stock to buy new shares, people familiar with securities lending said earlier this month.
About 15 percent of Wolfsburg, Germany-based Volkswagen’s common shares as of last month were lent, mostly for short-sales, according to London-based research firm Data Explorers. That was the highest proportion of any company on Germany’s 30-member benchmark DAX Index.