VW stock shares fall resembles BP’s oil spill scandal

#hashtags: #Volkswagen #British Petroleum #Protection Agency

Volkswagen’s shares getting in trouble seem to be causing the same risky situation for traders just like the British Petroleum’s oil spill did back in 2010, creating attractive trading opportunities at the surface, but affecting investors who make the wrong choice in the long run. Since last week when the U.S. Environmental Protection Agency stated that the company could pay as much as $18 billion in penalties for cheating in the emission tests made on its diesel cars, Volkswagen’s stock has gone down a massive 30%. A number of fund managers who invest in VW assets on periods of two to three years, said that the German carmaker’s shares had already declined so much that the stock was only bound to recover from that in the future. This week, Brokerage Bernstein wrote that despite a serious downturn VW is facing, it will recover from this mishap. On a more negative note, the Deutsche Bank spoke on the matter, describing it as an “investor’s nightmare”. The scandal VW is facing seems to remind us all of the BP shares back in April 2010 when the Gulf of Mexico oil spill led to a decline in the oil and gas company, whose stock shares have been cut in half ever since. Beaufort Securities’ sales trader Basil Petrides said that “I got burnt on BP in 2010 because I initially bought it on the dips. So with Volkswagen, I would suggest going short and selling every time Volkswagen rallies.” The problem with BP was that the company estimated incorrectly the legal costs of its problems in the U.S. post the oil spill. When its shares fell, several analysts estimated it was a buying opportunity for traders. However, two weeks later, the company had to set aside $10 billion for the scandal, leading to a decline in its $30 billion market value. At the moment, BP’s bill is expected to reach a huge $60 billion.