Germany’s financial regulator, BaFin, has announced that it will investigate whether the huge jump and subsequent decline in Volkswagen’s share price was due to market manipulation, Citywire reports. Earlier this week, Volkswagen’s share price more than quadrupled after it was revealed that Porsche had built up a much larger stake in VW than was previously known.
The news of Porsche’s holdings caused hedge funds that were short the stock to close out their positions and scramble to buy up the small amount of free-float shares available. Citywire reports that as a result, Volkswagen briefly became the world’s largest company by market capitalization on Tuesday. Since then, however, VW’s share price has fallen dramatically, losing 45% in one day alone.
According to the article, BaFin has not yet identified any targets for its investigation. However, penalties for market manipulation can be as much as five years’ imprisonment or a fine of up to €1 million.