Shares of Volkswagen AG jumped an eye-popping 93 percent on Tuesday after a similar surge the day before. Speculation on the reason centered on hedge funds needing to unwind bad bets on the share’s direction.
The immediate rise in VW share value — at one point, its market capitalization made it more valuable than Exxon Corp. — prompted German regulators to declare they were looking into the reasons for the explosive growth.
The surge came amid reports that hedge funds had been forced to buy scarce shares at high prices after mistakenly betting the shares would fall.
But with Porsche now holding nearly 43 percent of the company, and options to reach 75 percent by next year, that left a shortage of shares. If investors had shorted the stock by selling borrowed shares, they would need to buy shares in order to complete the deal.
On Sunday, Porsche Automobile Holding SE, which owns the company that makes the 911, Cayenne and upcoming Panamera sedan, said it increased its stake in VW to nearly 43 percent plus options, with an eye toward 50 percent by the end of 2008.
That started pushing VW shares into the stratosphere. 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’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.
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Tags: Cars, Economy, Germany, Hedge Funds, Porsche, Stock Market, VW