Group of investment funds sues Porsche, seeks $2.6 billion from failed VW takeover

Article by Christian Andrei, on January 2, 2012

A 2 billion euros ($2.6 billion) lawsuit was filed last Friday against Porsche Automobil Holding SE over damages that resulted from its botched attempt in 2008 to take over Volkswagen AG. The suit was filed in the district court of Stuttgart, Germany, by a group of investment funds whose members weren’t named.

Sources told Reuters that the plaintiffs are Elliott Associates, L.P., Elliott International, L.P., The Liverpool Limited Partnership, Perry Partners L.P., Perry Partners International, Inc., DE Shaw Valence International Inc., and York Capital Management Europe (UK) Advisors, LLP. The Broich Law Office is representing them in Germany.

According to the statement, an arbitration application was also filed by the plaintiffs against Volkswagen, two members of the VW supervisory board and one member of the management board of VW.

Porsche spokesman Frank Gaube said that the company is rejecting the accusations as they are “not justified.” However, he pointed out that the company has yet to receive the suit and so it would still have to study it. In 2009, Porsche and VW entered a deal to merge after Porsche incurred over 10 billion euros of debt but it wasn’t successful in gaining control of VW.

The merger was obstructed by lawsuits related to Porsche's failed attempt to buy VW, with the Wolfsburg, Germany-based automaker wanting to avoid responsibility for any financial implications due to the suits.

The complaint of the investor group states that Porsche took control of the price of VW common stock as it “secretly built enormous derivative positions” that covered nearly all of VW's freely traded shares. Porsche is also accused of triggering a “massive short squeeze” and then of later releasing billions of euros worth of shares into the short squeeze for its own profit. [source: Autonews]

Topics: porsche, investment, vw

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