Shares in carmaker Volkswagen nearly halve after main shareholder
Porsche takes steps to ease a squeeze on shortsellers.

Meanwhile stock exchange operator Deutsche Boerse cut the weighting of VW
shares in the blue-chip DAX index after a surge in value briefly made it the
world's most valuable company. VW's stock had quadrupled in a matter of
days, after Posrche said it had indirect control of 74.1 percent of VW. As
the German state of Lower Saxony holds a 20 percent stake in VW, less than 6
percent of the stock was left floating on the market, and short sellers
scrambled to find shares.


Anyone who paid over 1000 euros for each share in carmaker Volkswagen on
Tuesday would not be having a good day.

Shares in Europe's largest automaker lost almost half their value on
Wednesday - after the main shareholder, Porsche, took steps to ease the
squeeze on shortsellers.

In a statement, the maker of luxury cars like the 911 Carrera said it would
sell up to five percent of the ordinary shares it holds in VW.

The share squeeze came after Porsche announced it had indirect control of
just over 74 percent of VW - which makes cars like the Golf, and other
mass-market models.

As the state of Lower Saxony holds a 20 percent stake in the carmaker -
less than 6 percent of the stock was left floating on the market.

And shortsellers, or investors betting on a price drop with borrowed stock,
were prepared to pay almost any price for the few shares still available -
which meant VW's share price quadrupled in days - and it briefly became the
world's most valuable company.

There's wide speculation about which investment companies had been caught
out by the short squeeze - and some hedge funds also made heavy losses.

This trader says the swings in the VW stock price are playing havoc with
the market:

Dirk Mueller, Trader at MWB Fairtrade, saying:
"Porsche's move to give five percent of the shares back to the
market is a great coup for them. They are earning silly money this way. You
have to tip your hat to Wiedeking. Really, they could sell their shares,
suspend car production and limit themselves to the income from the interest.
But what was great for Porsche is a catastrophe for the market."

After the rise and fall in VW's shareprice distorted the DAX, Germany's
blue-chip index, Frankfurt's stock exchange operator Deutsche Boerse says it
will cut the company's weighting in the DAX to 10 percent.

Porsche said in a statement it wants to avoid further market
distortions.

And many investors will be hoping Porsche's move helps bring some stability
back to an already volatile market.

Joanna Partridge, Reuters