VW preferred stocks fall as Qatar's lock-up period ends

Fears of a looming supply glut hit Volkswagen preferred stock on Monday, which finished the first trading session of the new year as the worst performer among all 30 German blue chips.

The preferred stock, which replaced its ordinary shares in the DAX index on December 23, closed 1.9 per cent lower at €64.50 in a rising market.

A lock-up period for the preferred shares held by Qatar Holding LLC expired at the end of December, allowing the Gulf state's sovereign wealth fund to place further stock on the market following its roughly €1.5bn ($2.15bn) sale of 25 million shares in November.

Reuters reported in August, citing sources close to the deal, that Qatar had bought from Porsche SE options on 50 per cent of VW's preferred stock at a price of about €60 each. Qatar currently holds 17 per cent of VW ordinary shares.

Further adding to concerns of an imminent stock overhang are Volkswagen's plans to increase its capital in the first half of this year through the issue of up to 135 million new preferred shares, more than doubling the number of shares of that asset class in circulation at present. "One risk hanging over the preferred stock is the likely placement of shares by Qatar as well as the planned VW capital increase," one analyst at a German bank said.

VW plans to sell stock to fund the costly 16 billion euro debt and equity acquisition of both Porsche's sports car business and Europe's largest auto dealer, the privately held Porsche Holding.

"There are fears related to the coming capital increase and it's also true that the lock-up period is over," said Michael Foeller, sales trader at Frankfurt brokerage house ICF Kursmakler.