VW Common Shares Fall for Sixth Day; Short Interest Increases

By Alexis Xydias

Aug. 20 (Bloomberg) -- Volkswagen AG common shares extended their decline in the past six days to 38 percent as Porsche SE exits the carmaker’s securities and short-sellers increase bets the losses may grow.

The ordinary shares slipped 3.7 percent to 140.64 euros as of 11:53 a.m. in Frankfurt. The preferred stock dropped 5.7 percent to 64.51 euros, paring its 15 percent jump yesterday. Porsche climbed 1.7 percent to 55.11 euros, a seventh advance.

VW’s common stock has retreated since Porsche, which held about 20 percent of options to buy the securities, said Aug. 14 it’s selling a majority of them to Qatar. The emirate paid 80 euros for the carmaker’s common shares, Manager-Magazin said yesterday, citing unidentified people close to Porsche. The magazine added that Porsche also held options on VW’s preferred stock and is selling them to Qatar.

“What’s currently happening is what everyone expected one day would occur: the common shares have to return to their fair value,” said Robert Heberger, an analyst at Merck Finck & Co. in Munich. “Since the consensus seems to be a fair value of around 100 euros, then we may still have another 40 euros to drop. That said, with VW shares you cannot exclude they remain at incredible levels for a longer time.”

About 32.8 percent of the common shares available for loan were borrowed as of Aug. 18, according to Data Explorers in London, most likely by short-sellers who sell borrowed stock on expectations the securities will decline. That is the highest so-called short interest since March 13, the data show.

Voting Rights

The common securities carry a voting right that has proved worthless because the state of Lower Saxony has a blocking minority. The preferred shares don’t have a vote.

Wolfsburg, Germany-based Volkswagen and Stuttgart-based Porsche are negotiating a combination after Porsche’s plans to take over VW stumbled upon a veto from Lower Saxony and growing debt. Porsche said Aug. 14 that Qatar will become a shareholder in the combined company by buying a 10 percent stake in Porsche and taking over most of its options on VW common shares. VW plans to buy a 42 percent stake in Porsche’s automotive unit.

VW common shares have more than tripled since 2006 as Porsche built a stake of more than 70 percent in VW through stock and options during a four-year plan to take over Europe’s largest carmaker. Porsche has declined about 10 percent in that period.

Frank Gaube, a spokesman for Porsche, wasn’t immediately available to comment, while Christine Ritz, spokeswoman for VW, declined to comment. Gaube declined yesterday to speak about Porsche’s plans for its VW holdings.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.