Porsche today set out to calm volatile trading in Volkswagen shares by making up to 5% of VW stock available to desperate short-sellers.
A day after VW shares rose as high as €1,005 each, making the German cars group the world's most valuable company, Porsche said its move "may result in an increase in the liquidity of the Volkswagen ordinary shares".
The effect was immediate, with VW shares falling almost €350 or 37% to €596 in early trading compared with yesterday's closing price of €945. VW is now valued at €178bn compared with a high of €296bn (£240bn).
Porsche, under attack for its multibillion gains from using obscure derivative instruments, has denied allegations of market manipulation or insider trading.
Its Sunday night announcement it controlled 74.1% of VW stock sent hedge funds, which had bet on a collapse in VW shares in line with the global auto industry's downturn, into despair. It reduced the amount of VW shares in free float down to 5.7%.
Several leading funds are estimated to have lost up to €5bn when their short-selling turned toxic, with the total losses calculated at anything between €20bn and €30bn.
The turbulence on the Frankfurt stock exchange in the last two days, which has seen frantic traders dump other leading stocks in the Dax-30, has forced Deutsche Boerse to reduce VW's weighting in the index closer to 10% from next Monday. It rose yesterday to 27%, dragging the entire bourse into disrepute.