Last week, when it was announced that VW had produced and sold diesel cars with software installed that manipulated environmental tests, VW shares lost more than 35% of their value. The Dutch investor association VEB has now issued a claim against Volkswagen for the losses incurred by investors. According to the VEB, VW should compensate investors for the losses they made due to the scandal:
'Volkswagen wrongfully claimed that it produces extremely environmentally-friendly cars thereby creating the impression that it could gain a larger market share and thus more turnover. Volkswagen thereby misled investors buying or holding its shares. If Volkswagen had adequately informed public investors, they would not have bought or held the shares, or would have bought them at a lower price'.
The key question here is: who is going to get this compensation and who is going to pay for it? If all shareholders get a compensation, they are paying it to themselves, since they are the firm's owners. Any compensation paid by VW will be matched by an equivalent decline in VW's share value, so it's just an illusion. A compensation can only be 'real' if not all shareholders get it. In that case, the compensation is a transfer from the shareholders who don't get it to the shareholders who do.
Who should pay then? The controlling shareholders of VW have 50.73% of the voting rights via Porsche Automobil Holding SE, which holds 31.5% of VW's subscribed capital. The VEB will have to convince the judges that the controlling shareholders were well aware of what was going on with the faulty tests, so they should pay a compensation to the other shareholders. I wish the VEB good luck.
Disclaimer: I own a VW (but not a diesel)
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