VW’s Furious Rally Fueled by Sudden Surge in U.S. Trading Volume

(Bloomberg) -- Volkswagen AG shares continued their meteoric rise as U.S. retail investors seized on the stock amid rapid-fire announcements on the company’s efforts to rival Tesla Inc. in electric vehicles.

The German carmaker’s common stock soared as much as 14% and its preference shares climbed more than 9% before trimming gains Thursday in Frankfurt. VW’s market value exceeded 150 billion euros ($180 billion) in intraday trading just after it overtook SAP SE as Germany’s most valuable public company.

Retail investor interest is likely driving a massive run-up in trading volume for the automaker’s American depositary receipts, Barclays analysts led by Kai Mueller wrote in a report, pointing to a spike in VW-related Google searches, positive Twitter posts and recent news coverage. VW staged back-to-back briefings earlier this week on plans to build six battery factories and sell more EVs than Tesla no later than 2025.

Overnight moves in the ADRs are being “hedged out” by market makers buying the underlying common stock in Germany, driving significant demand and volume for those shares, Mueller said. “This leads to a squeeze of the VW ordinary shares, a story we have seen before.”

Read more: VW Soars Most Since 2008 Short Squeeze on Plans to Beat Tesla

VW has long had plans to develop the industry’s broadest lineup of battery-powered vehicles. Chief Executive Officer Herbert Diess has more aggressively gotten the message out recently, creating momentum after a series of bullish reports earlier this month on the company’s first dedicated EV for the mass market, the ID.3 hatchback.

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Two types of VW ADRs trade in the U.S. -- one is linked to the company’s common stock in Germany, and the other is tied to its preference shares. The common ADRs jumped as much as 49% on Wednesday, with volume surging to more than 15 times the three-month daily average during the session.

VW’s common stock is much less liquid than VW’s preference shares because three holders -- the Porsche and Piech family, the German state of Lower Saxony and Qatar -- hold about 90% of it. The small supply available to U.S. retail investors is further driving up the common stock more so than the preference shares, Mueller said.

“This could mean that the preference shares also continue to move much higher from here unless we see a material reversal in ADRs,” he wrote.

Investors also may have been too harsh on VW in the past year, focusing on issues including the ID.3’s delayed launch, the company missing an emissions target and Diess’s job security, according to JPMorgan analysts led by Jose Asumendi.

The CEO stayed on after a weeks-long conflict with key stakeholders late last year and has since expanded VW’s electric push, turning the company into a “a serious contender to Tesla,” the analysts wrote in a report.

The German financial watchdog BaFin is monitoring trading in VW shares, a spokeswoman told Bloomberg News on Thursday.

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