Notorious Spread Between VW Ordinary and Preference Shares
Topic of the day
If you find two almost identical Volkswagens on a car dealer's lot and one costs 25 per cent less than the other, the cheaper one is usually likely to be the preferred choice. But a surprising number of investors seem to forget that the same logic applies to the stock market. A wide spread has opened up between the price of Volkswagen's ordinary shares, currently around 290 euros, and the price of its preference shares, which are trading at just under 220 euros. For foreign investors, and apparently especially those from the USA, the differences are not always easy to see through. The preference shares are identical to the ordinary shares, but have no voting rights, nor are they bond-like instruments as in some countries. In the US, there would be two different classes of shares. The spread was notorious in 2008 when Porsche tried to take over VW. That saga ended with a short squeeze that briefly made VW the most valuable company in the world due to the massive rise in its common share price, and VW's takeover of Porsche's operating business. Inexperienced US investors seem to be buying VW common shares without realising that the preferred shares, confusingly named for them, offer the same for less. US trading volume in American depositary receipts (ADRs) that track VW ordinary shares has jumped, as has Google search volume for the corresponding ticker symbol VWAGY.
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Shares on the Swiss stock exchange suffered slight losses on Wednesday. The SMI lost 0.3 per cent to 11,064 points. Roche shares extended Tuesday's losses and lost a further 1.5 per cent. Here, the discontinuation of the phase III trial of Tominersen, a drug against Huntington's disease, had weighed. The share of competitor Novartis also closed in the red, but at a modest 0.4 per cent. The third heavyweight Nestle fell 0.4 per cent. The SMI was led by Partners Group (+2.6 per cent to CHF 1,205). Credit Suisse confirmed its "Outperform" rating for the share and raised its price target to 1,260 francs. The analysts spoke of company-specific growth dynamics with remunerative fees at the asset manager. Financial stocks benefited from rising yields again. Credit Suisse, UBS, Zurich Insurance and Swiss Re gained between 0.5 and 1 per cent.
Europe's main equity indices closed mixed on Wednesday, with investors cautious after the latest restrictions in France and Germany to curb the Covid-19 pandemic may dampen the euro zone's economic outlook. The Stoxx Europe 600 index rose 0.02% to 423.4 points. In Paris, the CAC 40 and the SBF 120 gained 0.03% each. In Frankfurt, the DAX 30 gave up 0.4%, while London's FTSE 100 rose 0.2%. Carrefour (+2.3%) reached an agreement with Advent International and Walmart to acquire Grupo BIG, a major food retailer in Brazil, for an enterprise value of R$7bn, or €1.07bn. Moody's Investors Service on Wednesday downgraded oil majors Total (+1.6%), Exxon (+3.2% on Wall Street), and BP (+2% in London) due to falling oil prices in connection with the Covid-19 pandemic and lower refining margins. ASML, a specialist in photolithography machines for the semiconductor industry, gained 4.2% in Amsterdam, buoyed by announcements from US-based Intel, one of its main customers. Spanish bank CaixaBank (+1.9% in Madrid) announced on Tuesday evening that its merger with Bankia should be finalised by 26 March. CaixaBank said it had received approval from Spain's National Commission for Markets and Competition (CNMC) to proceed with the merger. Caixabank's acquisition of Bankia, announced last year, will create Spain's third largest bank in terms of assets after Banco Santander and Banco Bilbao Vizcaya Argentaria.
The New York Stock Exchange ended lower on Wednesday, weighed down by technology stocks at the end of a volatile session. The Dow Jones Industrial Average (DJIA), which had spent most of the session up, closed virtually unchanged at 32,420.06 points. The broader S&P 500 index lost 0.6% to 3,889 points. At the same time, the tech-heavy Nasdaq index fell 2% to 12,961.89 points. Intel (-2.3%) plans to use more contractors to produce its processors, while spending $20 billion on building new factories. Oil stocks advanced sharply, led by Exxon (+2%), as crude oil prices posted solid gains at the close in New York, buoyed by fears about oil supplies after a container ship blocked the Suez Canal. Adobe (-1.9%) reported quarterly results and annual forecasts that beat analysts' expectations. ViacomCBS shares fell more than 23% to $70.10 after the media company announced a $3 billion capital increase to fund the development of its new streaming service, Paramount+. ViacomCBS shares closed at a new all-time high of $100.34 on Monday after nearly doubling in the past three months. Tesla (-4.8%) has started accepting bitcoin payments for the purchase of its vehicles, its boss Elon Musk announced in a tweet on Wednesday. Digital wholesale marketplace operator for auto sales ACV Auctions closed up 25% at $31.25 in its first listing, after going public at $25 a share, valuing the company at about $3.85bn. US cloud infrastructure provider DigitalOcean said it had priced its IPO at $47 per share, the high end of its guidance range. This values the group at $4.95 billion. The brokerage application Robinhood announced on Tuesday evening that it had filed an initial public offering (IPO) with the US Securities and Exchange Commission (SEC).
The East Asian stock markets move between slight gains and losses on Thursday. However, the stock market in Japan is firm: the Nikkei index is up 1.3 per cent to 28,775 points. On the Chinese stock exchanges, US-Chinese tensions are clouding sentiment: the Hang Seng Index closed with slight gains, after being clearly in negative territory at the beginning, weighed down by technology and pharmaceutical stocks. The Kospi in Seoul also showed a slight plus after a weak stock market start.
The 10-year US Treasury bond rate eased slightly to 1.607% after ending the previous day at 1.627%. It had hit a high of 1.730% last week.
Citi raises Beiersdorf target to EUR 83 (82) - Sell
NordLB raises Nordex target to EUR 30 (21) - Buy
Warburg raises Rheinmetall target to EUR 117 (107) - Buy
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