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VW prefs don’t deserve DAX treatment

Volkswagen’s merger with Porsche has exposed a bizzare quirk in the Deutsche Boerse’s index requirements, which could allow the carmaker’s preference shares to replace its ordinaries in the flagship DAX equity index.

Preference shares have no place in blue-chip equity indices. Their dividends must be paid before any distribution to ordinary shareholders, but they have no right to anything further, often lack voting rights, and escape most of the disclosure requirements imposed on ordinary shareholders.

 The latest twist in the VW/Porsche road trip is Qatar’s sale of half of some 50 million VW preference shares it has accumulated. It is concentrating its investment on VW’s ordinary shares, where it is aiming to achieve a holding of 17 percent.

This will mean more than 90 percent of VW’s voting shares will be held by the Porsche clan, the state of Lower Saxony and the Qataris. With a free float of less than 10 percent, the ordinary shares will no longer qualify for DAX inclusion.