VW shares dive as Porsche eases short squeeze

Shares in carmaker Volkswagen nearly halved on Wednesday after controlling shareholder Porsche took steps to ease a squeeze on shortsellers that more than quadrupled the stock in days.
Porsche itself had prompted the meteoric rise in VW stock with its announcement on Sunday that it had effective control of 74.1 percent of VW, leaving less than 6 percent in the market.
The stampede to cover open short positions after Sunday's announcement vaulted VW's market value to 278 billion euros and its shares to finish at a record 945 euros on Tuesday.
Investors cried foul, and German securities watchdog BaFin said it would take a closer look at Porsche's dealings for signs of insider trading and market manipulation, but the company said again on Wednesday it had done nothing wrong.
Analysts at Commerzbank estimated Porsche's strike price on its cash-settled hedges were around 100 euros per share, meaning Porsche could make 5.9 billion euros from selling 5 percent of its call options at a price of 500 euros.
Although it stands to gain more than the value of all of its listed preferred shares put together, a Porsche spokesman denied speculation it wanted to "cash in" with the deal.
German hedge fund association BAI said some funds might have been damaged by the squeeze, but that was inevitable in a market economy.
Only 24 hours after peaking as the world's biggest company by market value, VW stock fell on Wednesday as low as 491 euros as the market exhaled in relief that Porsche was releasing a part of its hedge and alleviating the worst of the squeeze.
Deutsche Boerse, operator of the Frankfurt exchange, said late on Tuesday it would cut the weighting of Volkswagen shares in the DAX to 10 percent from Monday after VW's leap had distorted the index.
Shortsellers who rushed to close their positions after Porsche's announcement on Sunday were paying virtually any price to get their hands on the few remaining shares, even though Porsche insisted its announcement would allow short sellers to unwind their positions "without haste and without greater risk."
There was wide speculation about which investment companies had been caught out by the short squeeze, and many banking shares fell as a result.
Hedge fund manager David Einhorn's Greenlight Capital suffered heavy losses from a VW trade, people familiar with his portfolio said on Tuesday. The fund declined comment.