CEO’s Musk moves spark up VW shares
Volkswagen has gone from corporate dinosaur to stock market darling, and its CEO’s imitation of Elon Musk has a lot to do with it.
Herbert Diess has taken a page out of the Tesla CEO’s script for captivating investors big and small, taking a hands-on role in getting VW’s message out on social media and staging splashy events big on ambition. It’s paying off — the carmaker’s common shares are up more than 70% this year.
The turnabout in sentiment on VW has been dramatic and sudden.
Its market capitalisation dropped last year as Tesla vaulted past all other carmakers to become the world’s most valuable by a wide margin. But already this month, VW has added à31.6bn (about R554bn) to its valuation, driven by optimism it may be able to catch up and perhaps even surpass Tesla in global electric vehicle (EV) sales.
VW’s stock started its ascent when UBS Group analysts issued a bullish set of reports on its findings from tearing apart VW’s first mass-market model built off a dedicated EV platform, the ID.3 hatchback. The car is “the most credible EV effort by any legacy auto company so far”, wrote Patrick Hummel, who raised his price target on the shares.
Much like Musk tries to dominate the news cycle, VW has made rapid-fire announcements in the weeks since then.
It took the wraps off a more spacious version of the Porsche Taycan, doubled the VW brand’s EV sales share target for Europe and announced through Diess’s LinkedIn and Twitter accounts that it would host an event similar to Tesla’s “Battery Day” in September.
“VW’s Power Day was a watershed event in the company’s history,” Tom Narayan, an analyst at RBC Capital Markets, wrote in a report on Wednesday, raising his price target by roughly a third. He said VW’s batteryelectric vehicles “should enable shares to rerate higher, given improved profitability”.
VW followed up its declaration that it aims to build six battery factories in Europe alone by the end of the decade with an annual earnings conference that it also chose to focus on EVs. The common shares soared as much as 29% intraday in Frankfurt, the biggest jump since Porsche’s failed attempt to acquire the company a dozen years ago triggered a short squeeze.
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 90% of it. The preference shares finished on Tuesday up 6.7% to close at the highest since July 2015.
The outsize gains by VW’s common stock have been partly driven by US retail-investor buying and high short interest, according to Ken Menager, a special situations strategist at Avalon Capital.
VW’s American depositary receipts are based on the common-share listing in Germany, and volume has soared in the past few days.
In addition to VW’s key shareholders, one big beneficiary of the share surge is Diess. A little over a year ago, the CEO initiated a stock-buying plan with a standing order for à50,000 worth of shares a month. The common stock hovered at about à100 in March last year, when the pandemic started to roil the global car industry. It’s now at à266.60.
The healthy gains Diess has generated lately are still a far cry from what Musk pulled off last year, but they have partially made up for lowered compensation.
The CEO’s salary, including pension contributions, fell to à7.7m last year, from à8.4m in 2019, VW disclosed in its annual report this week.