Life & Style | Motoring

Porsche admits making $8.7b from VW option trades

Porsche has fuelled the controversy over its stake building at rival Volkswagen by revealing it had earned eight times as much from its VW option trades than from actually selling cars.

  • Financial Times
  • Published: 22:50 November 8, 2008
  • Gulf News

Frankfurt: Porsche has fuelled the controversy over its stake building at rival Volkswagen by revealing it had earned eight times as much from its VW option trades than from actually selling cars.

The company said it made 6.83 billion euros ($8.7 billion Dh31.93 billion) from trading in VW options, plus another 1 billion euros from the rising value of its Volkswagen stake, in the fiscal year that ended in July.

This helped Porsche to increase its pre-tax profit by 46 per cent to 8.57 billion euros, even exceeding the company's revenues.

Analysts dubbed Porsche a "hedge fund", and even one of the most successful ones in the world, at a time when other carmakers are struggling with a sharp downturn.

Investors' onslaught

"If they now increase their stake [in VW] to more than 50 per cent and cash in the remaining 25 per cent of the options, they would make hedge funds and banks pay for the whole takeover," said Arndt Ellinghorst, analyst at Credit Suisse.

The extraordinary gains reaped from VW options trades caused another onslaught from investors.

Klaus Kaldemorgen, head of DWS, one of Germany's largest institutional investors, alleged that Porsche had used massive information asymmetries at the expense of other investors.

However, Porsche denies any wrongdoing and blames short sellers for the massive VW share price surge in recent months.

"We vehemently reject the accusation of share price manipulation," Porsche said in a statement last week.

Last month, VW's shares rocketed after Porsche unexpectedly disclosed that through the use of derivatives it had increased its stake in VW from 35 to 74.1 per cent, prompting Bafin, Germany's financial regulator, to launch a formal investigation into possible market manipulation.

But analysts blamed Bafin for allowing Porsche's use of options to secure secretly a dominating stake in VW.

Investment bankers said Bafin felt little appetite for pursuing an investigation of Porsche as it lacked political support for such a move.

The market turmoil stirred by VW's ballooning share price did not cause any political backlash within Germany.

However, Wendelin Wiedeking, Porsche's chief executive, might intensify the debate about executive pay in Germany. He is believed to have earned about 80 million euros last year.

This would make him one of the highest paid executives in the world. Porsche did not want to comment on Wiedeking's income.

However, car industry insiders said other executives in the industry were "not amused" about his pay, as it gave easy ammunition to the trade unions for a general assault on greedy managers.

Gulf News
Life & Style editor's choice

More from friday

  • WH_141024_Lambo_Huracan_STF_Stefan065
    Unhinged Huracàn meets the UAE’s maddest road

    Al Taween. Renowned for its goat s, tiny grocery shops and one of the great est mounta in roads in the world. Ripping up the newly laid tar mac? A Lamborghini Huracán. Buckle up!

  • WH_141031_mywheels_rashed (1)
    Rashed Abdulla Bin Fahad’s double impact

    Ever since he was bitten by a Mustang Cobra, Rashed couldn’t look beyond American cars. So when it came to choosing a pick-up truck and a performance saloon, the decision was easy for him

  • WH_141031_Subarub driven (6)
    Subaru WRX STI driven

    Subaru’s iconic flagship sports saloon is back, and along with all the upgrades comes a welcome price, too

  • WH_141031_SUP_Fiat 500 (2)
    Fiat 500 Cult refreshed

    Fiat’s nifty city car star has been updated for 2015 to keep pace with its small car rivals. Does it still have the magic that makes it a style icon?

  • Jonathan Castle
    Shifting opinions

    In defence of the (gasp!) continuously variable transmission...

More from Wheels

More from aquarius

More from alpha

  • gold-leaf-bath
    Inside Downtown Design

    From chic and contemporary to modern and magnificent home wares, this year's exhibition is nothing short of extraordinary

  • Noura_Main
    Highly commended finalist: Noura Al Ramahi

    Along with our three fabulous finalists, the judges decided to include a Highly Commended category as the standard of entries to our competition was so high. This goes to Noura Al Ramahi for her stunning villa in Abu Dhabi. Well done Noura – it’s beautiful!

  • IO_141020_Home of the Year awar86
    In pictures: InsideOut Home of the Year Awards

    The InsideOut Home of the Year Awards 2014 party held at the Nawwara Bar at the JW Marriott Marquis on the 20th October went with a swing! Here’s our gallery of a really great night….

  • IO_141014_Casablanca_STF_Stefan07
    InsideOut Home Of The Year finalist: Dana Jaber

    Dana Jaber’s Al Barsha villa was considered by the judges to be bold, original and eclectic. We loved her individual approach to decorating which lends interest and unexpected touches to every room

  • Main_2
    InsideOut Home Of The Year finalist: Helena Brown

    Helena Brown’s home in Umm Suqeim was a favourite with the judges because of the many personal touches, and undeniable sense of comfort and style. Her interest in Feng Shui has helped achieve a calm relaxed ambience

More from insideout