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. Last Updated: 07/27/2016

AvtoVAZ Shares Shoot Up 300%

Shares of top automaker AvtoVAZ have soared 300 percent in frantic buying and selling since the beginning of February — and no one is quite sure why.

Shares in the automaker, which makes two-thirds of all Russian cars, started the year at $1.70 and climbed as high as $5.40 Tuesday, before closing Thursday at $4.78.

AvtoVAZ trading has accounted for more than 1 percent of all transactions on the Russian Trading System in the last two weeks, with a significantly larger but unrecorded sum being passed between brokerages, making it impossible to know who is behind the activity, Alexander Agibalov, an analyst at Aton brokerage, said Thursday.

What is known is that the sudden interest in the Tolyatti-based AvtoVAZ is unusual: For the past year, trading in AvtoVAZ shares has been virtually nonexistent, with only 1,000 shares, or less than 0.003 percent of its floated stock, changing hands.

Industry watchers polled said that while the long-awaited news earlier this month that U.S. giant General Motors had finally clinched a $330 million joint venture with AvtoVAZ may have drawn attention to the company, it wasn't the main reason for the rally.

Troika Dialog analyst Andrei Ivanov said the deal with GM alone couldn't account for the stock's performance because the real effect of the venture won't be felt until the two automakers roll out their first jointly made vehicle two years from now.

"AvtoVAZ's share price could rise no more than 10 percent on expectations [about the GM deal]," Ivanov said.

There are two schools of thought on the real reason stock in AvtoVAZ, which Troika Dialog says is worth $1.2 billion, is so hot.

The first, which has been rumored, is that metals giant Siberian Aluminum is interested in buying up the company. Siberian Aluminum itself has indicated it is interested. And it recently acquired automaker GAZ and bus maker PAZ and was reported this week to be in talks with No. 1 truck maker LiAZ.

However, unlike GAZ and PAZ, it is impossible to acquire AvtoVAZ by accumulating its free float because the controlling stake is in the hands of AvtoVAZ management, according to a Renaissance Capital report.

More likely, analysts said, is that AvtoVAZ management — and entities linked to its management — are split into two opposing groups that are vying for control of the company.

Currently AvtoVAZ's two major shareholders — All-Russia Automotive Alliance, or AVVA, and Automotive Financial Corp., or AFK — are both linked to rival camps in the company's management and together hold more than a 50 percent stake.

AVVA controls 32.3 percent, AFK owns 19.86 percent and 5.45 percent belongs to Russ-Invest, according to the latest Federal Security Commission data. But the ownership structure of AvtoVAZ has changed this year and it is now unclear who owns what. And with a new board of directors slated to be elected at the next general shareholders meeting on May 26, the opposing camps are apparently strengthening their hands, said United Financial Group's Yulia Zhdanova.

Zhdanova said that about 30 percent of AvtoVAZ shares are now held by AVVA and its affiliates, who back AvtoVAZ board chairman Vladimir Kadannikov. And another 30 percent is held by AFK and its affiliates, who back Alexei Nikolayev, the general director.

"There is a conflict of interest and both groups are buying shares," Zhdanova said.