Frankfurt - Volkswagen AG shares dropped sharply Wednesday after the key shareholder in Europe's biggest carmaker said it was moving to try to stabilize VW's stock, which soared earlier this week.

In a statement, luxury sports carmaker Porsche AG said that, depending on the state of the market, it planned "to settle hedging transactions in the amount of up to 5 per cent of ordinary Volkswagen shares."

"This may result in an increase in the liquidity of the Volkswagen ordinary shares," Porsche said.

The news that Porsche wanted to build up its stake in Volkswagen to 74.1 per cent sent VW shares rocketing up this week, surging by 146 per cent on Monday alone.

However, Porsche's announcement that it planned to try to ease the upward pressure on Volkswagen's stock resulted in the VW share price dropping 36.5 per cent to 600 euros (762.24 dollars) in early trading.

In the meantime, however, Porsche's shares charged ahead by more than 30 per cent after its statement.