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Legal Issues Are Giving Volkswagen Investors An Enormous Headache

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Legal Issues Are Giving Volkswagen Investors An Enormous Headache
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  • A scandal involving Volkswagen AG (ADR) (OTC: VLKAY) surfaced last Friday.
  • According to reports, one of the world’s largest carmakers (if not the largest) was cheating emissions tests in the U.S., the EPA said.
  • Shares of the company are down more than 17 percent on Monday trading.

Last Friday, the U.S. Environmental Protection Agency (EPA) said Volkswagen had been using software to rig emissions tests in certain diesel VW and Audi branded cars (about 482,000 cars) sold in the country.

Facing an EPA investigation, the company had to admit its wrongdoing, and could now be penalized with more than $18 billion in fines. The carmaker halted the sales of several popular diesel-powered cars in the U.S., and issued an apology to customers on Sunday.

Related Link: Porsche Goes Green: Is The New Mission E The Ultimate Anti-Tesla?

"I personally am deeply sorry that we have broken the trust of our customers and the public," said Chief Executive Officer Martin Winterkorn.

On Monday, shares fell roughly 17 percent on the Frankfurt exchange, driving the company’s valuation about $16 billion lower. In an article published on MarketWatch, Sara Sjolin explained that seeing a plunge of this proportion in a day is "unusual for the shares of a German blue-chip company, as the German market is mostly institutionally driven.”

The German government has now demanded Volkswagen to prove it did not cheat emissions tests in its home country as well. Analysts believe this decision could drive the stock down further.

Of note, at the time of publishing, news broke that the company is reportedly the result of a U.S. criminal probe (via Bloomberg).

Disclosure: Javier Hasse holds no stakes in any of the securities mentioned above.

Posted-In: Audi EPA VWNews Eurozone Legal Markets Movers Best of Benzinga

 

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