Notes on the Volkswagen Scandal
Test 1 (29.10.2014): Case Volkswagen Scandal
Unprecedented scandal was provoked by ordinary shares of Volkswagen in Frankfurt stock-exchange. 30.10.2008
German company Volkswagen has become in very short time the biggest company in the world (making the American oil giant Exxon-Mobil second in the list). It happened after 500% growth of VW ordinaries. On Friday October 24 market price of VW ordinary share was EUR 211, but at the end of the Tuesday October 28 trading session it reached EUR 1005.
This skyrocketing growth of VW shares was not caused by financial indicators of the car producing concern. It was caused by speculative stock-exchange events triggered by declaration of Porsche owners made public on Saturday. Porsche declared intention to raise their share in Volkswagen not to 50% as it was previously planned but to 75%. The investors were mostly shocked by news that Porsche, whose block of shares of Volkswagen was 42,6%, had already bought options on 31,5% of VW ordinary shares.
This "bomb" has blown up the Frankfurt stock-exchange and caused panic among the speculators. According to the Law, 20% of Volkswagen shares belong to the N. Sacsonia State which hosts the headquarters of Volkswagen. Summing up this 20% share with the block of shares and options in the portfolio of Porsche leads to conclusion that only around 6% of voting shares of VW remained in free circulation. Artificial shortage of these securities (usually characterised as high liquidity securities) has caused immense demand on them.
One more dramatic factor, a number of speculators who forecasted cheapening of Volkswagen shares had opened short positions. So after the declaration by Porsche not only the price of VW ordinaries jumped but also these speculators had to buy the shares at any price.
As a result, on Monday the price of Volkswagen shares tripled and then broke through EUR 1000 level. It has lead to distortion of the German stock exchange index
Unprecedented scandal was provoked by ordinary shares of Volkswagen in Frankfurt stock-exchange. 30.10.2008
German company Volkswagen has become in very short time the biggest company in the world (making the American oil giant Exxon-Mobil second in the list). It happened after 500% growth of VW ordinaries. On Friday October 24 market price of VW ordinary share was EUR 211, but at the end of the Tuesday October 28 trading session it reached EUR 1005.
This skyrocketing growth of VW shares was not caused by financial indicators of the car producing concern. It was caused by speculative stock-exchange events triggered by declaration of Porsche owners made public on Saturday. Porsche declared intention to raise their share in Volkswagen not to 50% as it was previously planned but to 75%. The investors were mostly shocked by news that Porsche, whose block of shares of Volkswagen was 42,6%, had already bought options on 31,5% of VW ordinary shares.
This "bomb" has blown up the Frankfurt stock-exchange and caused panic among the speculators. According to the Law, 20% of Volkswagen shares belong to the N. Sacsonia State which hosts the headquarters of Volkswagen. Summing up this 20% share with the block of shares and options in the portfolio of Porsche leads to conclusion that only around 6% of voting shares of VW remained in free circulation. Artificial shortage of these securities (usually characterised as high liquidity securities) has caused immense demand on them.
One more dramatic factor, a number of speculators who forecasted cheapening of Volkswagen shares had opened short positions. So after the declaration by Porsche not only the price of VW ordinaries jumped but also these speculators had to buy the shares at any price.
As a result, on Monday the price of Volkswagen shares tripled and then broke through EUR 1000 level. It has lead to distortion of the German stock exchange index