Porsche moved Wednesday to put a brake on volatility in Volkswagen shares - which have soared over four times in value in recent days - by selling up to 5% of its options for common shares in the automaker.
The announcement sent shares in Volkswagen - Europe's biggest automaker by sales - plunging 40% in Frankfurt trading to 578.92
euros ($725.16) after two days of stratospheric gains.
It also pulled the DAX index of blue chip stocks lower, by less than 1%, to 4 789.40.
Frank Gaube, a Porsche spokesman, said the company had offered to sell "up to 5% of our options holding depending on market
conditions" on Wednesday.
That comes after a weekend announcement that Porsche had bought options to increase its ownership in Volkswagen to 75%, building
upon its previous ownership of 42.6% in common stock.
"We're only willing to reduce our options position as little as possible," and Porsche won't sell "one single share" of the 42.6% it holds in common shares, Gaube said.
Gaube said if the company sells a full 5% of its Volkswagen options, Porsche would still hold options on another 26.5% of VW
common shares, giving it effective control of 69.1% of the company.
Porsche still aiming for 75%
He said Porsche will continue its plans to increase its stake to 75% of the company some time in 2009.
The decision came after two days of wild gains by VW that set jaws dropping and eyes popping. Volkswagen shares jumped 82% on
Tuesday after a similar surge Monday.
Speculation on the reason for the gains centered on the fact that the number of available shares to trade after Porsche's deal had been
dramatically reduced. The shares were propulsed higher by reports that hedge funds and big investors were forced to scramble to buy the few remaining shares to get out of mistaken bets that the stock value would fall.
That, in part, was to blame for Volkswagen shares rising in value to as much as 1 005 euros ($1 256) on Tuesday. They later settled back to close at 945 euros ($1 183.70).
"Will show mercy"
"Porsche has announced today that they will show mercy and put 5% of the shares on the financial market," said Dirk Mueller, a
trader at mwb Fairtrade in Frankfurt.
"Ingenious coup for Porsche. They'll make a lot of cash," he said.
Porsche shares were up 35% at 62.10 euros ($78.87) in Frankfurt morning trading.
German financial markets regulator BaFin said Tuesday it was looking into the recent history of Volkswagen share trading to see if there has
been any market manipulation or insider trading.
Late Tuesday, Deutsche Boerse AG, which operates the Frankfurt exchange, said it would "adjust the weighting of DAX constituents" but
did not plan to halt trading in VW shares, according to a statement.
It planned to adjust the DAX weight of VW shares from 27% Tuesday to 10% on November 3, heeding calls by critics who said that
VW's massive gains had driven the DAX index higher though Volkswagen is just one of 30 companies making up the measure.